S055356, Opinion — Fort Vannoy Irrigation v. Water Resources Comm.

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Argued and submitted May 13, decision of Court of Appeals affirmed; order of
Water Resources Commission reversed, and case remanded to commission for
further proceedings consistent with this opinion July 10, 2008

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, S055361)
188 P3d 277

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# En Banc

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 Hobson 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

\* Appeal from Final Order of the Oregon Water Resources Commission. 214
Or App 88, 162 P3d 1066 (2007).

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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.

The decision of the Court of Appeals is affirmed. The order
of the Water Resources Commission is reversed, and the case
is remanded to the commission for further proceedings con-
sistent with this opinion.

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## 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 (dis-
trict), 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 estab-
lished in those certificates. ORS 540.510(1) provides, in part:

"Except as provided in subsections (2) to (8) of this sec-
tion, 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 provi-
sions 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

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Oregon.' 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 pro-
cedural 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 cer-
tificates 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 sup-
plies 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 As provided in ORS 537.010, the "Water Rights Act" includes "ORS 536.050,
537.120, 537.130, 537.140 to 537.252, 537.390 to 537.400, 538.420, 540.010 to
540.120, 540.210 to 540.230, 540.310 to 540.430, 540.505 to 540.585 and 540.710 to
540.750." The "Irrigation District Law" is set forth in ORS chapter 545. ORS
545.001.

2 Before the creation of the Water Resources Department, the State Engineer
was charged with administering water right transfers. See, e.g., Or Laws 1927,
ch 219, § 1 (identifying State Engineer as official previously charged with admin-
istration of water rights transfer provision). Although the State Engineer issued
both certificates in 1930, the priority date associated with certificate 8942 is
June 21, 1930, and the priority date associated with certificate 8943 is April 6, 1922.

3 Three of the water right certificates (2803, 3247, and 15340) were issued to
Ken-Wal's predecessors, rather than to the district, and are not at issue here.

4 Certificate 8942 designates the appurtenant land (i.e., the place of use for the
water provided under that certificate) as consisting of 817 acres, and certificate
8943 consisting of 71 acres. At oral argument before this court, the parties agreed
that Ken-Wal's land constitutes only a portion of the land to which the district sup-
plies the water provided under the certificates-i.e., that Ken-Wal owns only a por-
tion of the appurtenant land designated in the certificates.

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(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, not-
withstanding the fact that Ken-Wal would obtain a portion of
the water flowing through that system under the two certifi-
cates issued to the district. The district and one of its mem-
bers, Baertschiger,6 protested the proposed changes, assert-
ing, 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 asso-
ciated with the water rights established in those certificates."
The district refused to give its consent.

The department rejected the district's challenge,
issuing a proposed order that approved Ken-Wal's applica-
tion and that concluded that the district's consent was not
required to change the disputed points of diversion. The pro-
posed order incorporated a Ruling on Legal Issues and Order
that had been issued earlier in the administrative proceed-
ings 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."

" Ken-Wal's application describes the new irrigation system as follows:

"The system will be a pressurized sprinkler system with 4 big gun travel-
ing sprinklers and a 125 HP electric pump. The mainline will be a buried plas-
tic pipe starting at 12 inch diameter and ending with 5 inch diameter pipe with
4 inch risers to connect the 4 traveling big gun sprinklers. The system has been
engineered by Natural Resource Conservation Service."

6 We refer to the district and Baertschiger collectively as the "district."

7 The district also challenged Ken-Wal's proposed changes concerning certifi-
cates 2803, 3247, and 15340, on the ground that Ken-Wal had not used the water
provided thereunder in accordance with the terms of the certificates during the
preceding five years. That additional ground is not at issue on review in this court.

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

The Water Resources Commission (commission) con-
sidered 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 irri-
gation district is a recurring question," the commission deter-
mined 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 approv-
ing 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 P3d 1066
(2007). That is, the court construed "holder" as referring to
the party that owns the "right to use of the water" provided

" The commission found that Ken-Wal "owns all the land appurtenant to the
water rights proposed for transfer." That finding reflects the fact that Ken-Wal
owns all the land to which water is provided to it under certificates 8942 and
8943-i.e., that Ken-Wal's share of the certificated water is supplied solely on land
that it owns- not that Ken-Wal owns all the land to which water is provided under
the certificates.

9 The department's final order also cancelled a portion of the water right estab-
lished in certificate 8942 and diminished a portion of that water right from primary
to supplemental irrigation. On review, the district has not advanced any separate
argument regarding those specific changes.

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under a water right certificate, which the court determined to
be the party to which the certificate is issued. See id. at 96
("[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 observa-
tions of Justice Sutherland, writing for the United States
Supreme Court in Power Co. v. Cement Co., 295 US 142, 55
S Ct 725, 79 L Ed 1357 (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 the Canadian border
to the boundary of Mexico-an area greater than that of the
original thirteen states-the lands capable of redemption,
in the main, constituted a desert, impossible of agricultural
use without artificial irrigation.

"In the beginning, the task of reclaiming this area was
left to the unaided efforts of the people who found their way
by painful effort to its inhospitable solitudes. These west-
ern pioneers, emulating the spirit of so many others who
had gone before them in similar ventures, faced the difficult
problem of wresting a living and creating homes from the

10 Historically, the Water Rights Act and the Irrigation District Law are rela-
tively recent measures in a cross-cultural pattern of organized irrigation that
spans the preceding 1,300 years in the American West. See Joseph L. Sax, et al.,
Legal Control of Water Resources 281-86 (3d ed 2000) (discussing history of western
water law).

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raw elements about them, and threw down the gage of bat-
tle to the forces of nature. With imperfect tools, they built
dams, excavated canals, constructed ditches, plowed and
cultivated the soil, and transformed dry and desolate lands
into green fields and leafy orchards. In the success of that
effort, the general government itself was greatly con-
cerned-not only because, as owner, it was charged through
Congress with the duty of disposing of the lands, but
because the settlement and development of the country in
which the lands lay was highly desirable."

Id. at 156-57. As part of that historical phenomenon, the
Water Rights Act and the Irrigation District Law share an
intertwined history, in that both laws served to establish irri-
gated agriculture on the lands of this state. A proper entry
point into that common background is the advent of the prior
appropriation doctrine in Oregon.

Over the preceding century and a half, Oregon water
law has known two doctrines applicable to the use of surface
water (i.e., water from streams and lakes)-the riparian doc-
trine and the prior appropriation doctrine. Janet C. Neuman,
Oregon, 6 Waters and Water Rights 941 (Robert E. Beck ed.
1991); Chapin D. Clark, Survey of Oregon's Water Laws 93-95
(1983); Wells A. Hutchins, The Common-Law Riparian
Doctrine in Oregon: Legislative and Judicial Modification, 36
Or L Rev 193, 193 (1957). Those doctrines are distinct in
terms of the bases on which water rights are founded. Ripar-
ian rights are based on a party's ownership of land adjacent
to a water source (i.e., riparian land); in contrast, appropria-
tive rights derive from a party's beneficial use of the water
appropriated from the source, irrespective of the ownership
of the riparian land. See Sax, Legal Control of Water
Resources at 20-21, 98-99 (describing riparian and appropri-
ative rights).

Although the riparian and appropriation doctrines
were once both recognized in this state, the enactment of the
Water Rights Act in 1909 (Or Laws 1909, ch 216) marks the
ascendancy of the appropriation doctrine as the prevailing
water law of Oregon. The event to which the arrival of that
doctrine is attributable throughout the American West is the
California gold rush of the late 1840s and early 1850s. See
Sax, Legal Control of Water Resources at 281-86 (discussing

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evolution of appropriation doctrine). The development of the
appropriation doctrine in that context-including the histor-
ical reasons for the central tenets of temporal priority and
beneficial use-has been described as follows:

"The discovery of gold in the tailrace of Sutter's mill trig-
gered an avalanche of gold seekers. Arriving by land and by
sea, they established mining camps in an area that only
recently had been acquired from Mexico by the Treaty of
Guadalupe Hidalgo. As yet there were no land offices and
little local government; the miners were trespassers on the
public domain. Nonetheless, they had need of government,
of some form of association, to protect their mining claims.
So in camp after camp they met and organized mining dis-
tricts, adopting rules for the definition of their property
rights in the gulches. * * * To retain their claims, miners
had to work them with diligence; otherwise they were for-
feited. When questions of right arose, they were settled by
reference to priority. Since the miners were squatters on
the public domain, they applied the law of the public
domain, first in time, first in right.

"After the days of the pan and shovel gave way to
ditches and sluiceboxes, questions of right to use the
streams arose. When they did, the miners applied the same
rules to water as they had to the land-first in time, first in
right. He who diverted water first had the prior right to it to
the extent of his diversion for use on both riparian and non-
riparian lands. To perfect the right, ditches had to be dug
with diligence and the water applied to beneficial use. It
was not to be wasted. As with the claims, when the use
ceased, the right ceased. Here was the genesis of a new
property right."

Robert Dunbar, Forging New Rights in Western Waters 61
(1983). This court previously has described the origin of the
appropriation doctrine in similar terms. See Brown v. Baker,
39 Or 66, 72-73, 65 P 799 (1901) (identifying origin of appro-
priation doctrine as local mining customs throughout the
"Pacific Coast" during and subsequent to California gold
rush). Relatedly, as early as 1864, the Oregon Legislative
Assembly recognized the right of miners to obtain vested
water rights in accordance with local custom. General Laws
of Oregon, Mines, ch XXXIV, § 6, p 814 (Deady 1845-1864)
("Miners shall be empowered to make local laws in relation to

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the possession of water rights * * * , subject to the laws of the
United States.").

Notwithstanding its roots in the mining context, the
appropriation doctrine was extended to water usage in other
economic sectors, including irrigated agriculture, both in
Oregon and elsewhere in the West during the late-nineteenth
and early-twentieth centuries. See, e.g., Power Co., 295 US at
154 (stating that rule generally recognized throughout west-
ern states and territories was that acquisition of water by
prior appropriation for beneficial use was entitled to protec-
tion, and that rule applied whether water was diverted for
manufacturing, irrigation, or mining purposes); Parkersville
District v. Wattier, 48 Or 332, 340, 86 P 775 (1906) (explain-
ing that discovery of gold in California gave rise to custom,
established by miners, of using water of streams flowing
through public lands to separate precious metal from baser
material, and that use of water from such streams was
extended to agriculture, manufacturing, and other purposes).
Among other sources, the legislative acts that preceded the
Water Rights Act-the 1891 Act (Or Laws 1891, p 52); the
1899 Act (Or Laws 1899, p 172); and the 1905 Act (Or Laws
1905, ch 228)-expressly recognized and extended the appro-
priation doctrine in the foregoing manner. See, e.g., Or
Laws 1891, p 53 (authorizing appropriation for irrigation
purposes).

Although the appropriation doctrine enabled irriga-
tors to divert and use water to raise crops on nonriparian
lands, the scope of resources required to accomplish such
appropriations sometimes proved prohibitive. As one scholar
has written:

"From the earliest times, the application of water for
irrigation has required contributions of labor resources,
and capital beyond the means of individuals. Some sort of
organizational structure has been necessary. Agricultural
irrigation on a large scale has existed from ancient times
and has been pursued regularly in the United States since
the opening of the West."

John H. Davidson, Distribution and Storage Organizations,
3 Waters and Water Rights 25-1 (Robert E. Beck ed. 1991). To
similar effect, this court has stated:

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"The general purpose of an appropriation is to utilize
the water in the arid regions, where the supply is limited,
for the development and advancement of beneficial indus-
tries. In many localities where the water is difficult of diver-
sion, and the expense considerable in conducting it to the
place of use, if individual landholders, or even an aggrega-
tion of them, were required to make the appropriation for
use upon their own possession, these general purposes
would be entirely defeated simply for the reason that such
holders could not bear the burden of making the
appropriation."

Nevada Ditch Co. v. Bennett, 30 Or 59, 96, 45 P 472 (1896).

In response to the resource burden, the irrigation
district is one of several water development and distribution
organizations that emerged to facilitate irrigated agriculture
throughout the West during the late-nineteenth century. See
Sax, Legal Control of Water Resources at 597-601 (discussing
carrier ditch companies, mutual water companies, and irri-
gation districts); see also Or Laws 1891, p 53 (authorizing
appropriation by "[a] corporation organized for the construc-
tion and maintenance of a ditch or canal or flume for general
irrigation purposes"). In that regard, California enacted the
seminal irrigation district legislation, the Wright Act, in
1887. 1887 Cal Stat, ch 34. Over the next 30 years, the other
western states followed suit, so that, "[b]y 1917, all seventeen
conterminous western states had adopted variations on the
Wright Act." Sax, Legal Control of Water Resources at 600.

In 1895, the Irrigation District Law was enacted in
Oregon as a copy of the Wright Act. Or Laws 1895, p 13;
Twohy Bros. Co. v. Ochoco Irr. Dist. et al., 108 Or 1, 13-14,
210 P 873 (1922). This court has described the purpose of the
Irrigation District Law with respect to irrigated agriculture
as follows:

"The purpose of the law is to make bodies of arid land, sus-
ceptible of irrigation from a common source and through
the same system of works, productive by distributing water
over them through canals, etc., belonging to and the prop-
erty of the irrigation district.

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"The basal principle is the division of the arid area of the
State, upon invitation of the settlers thereon, into commu-
nities or districts, which are determined by their irrigabil-
ity from a common source and through the same system of
works, and to invest such communities with power to raise
revenue by taxation and the issuing of bonds for the pur-
pose of acquiring water rights and constructing the neces-
sary canals, reservoirs, and works for the distribution of the
water over the lands within the district."

Little W. W. Irr. Dist. v. Preston, 46 Or 5, 7, 78 P 982 (1904);
see also Fallbrook Irrigation District v. Bradley, 164 US 112,
153, 17 S Ct 56, 41 L Ed 369 (1896) (upholding constitution-
ality of Wright Act; "The future prosperity of [several west-
ern] States, it was claimed, depended upon the validity of this
act as furnishing the only means practicable for obtaining
artificial irrigation, without the aid of which millions and
millions of acres would be condemned to lie idle and worth-
less, which otherwise would furnish enormous quantities of
agricultural products and increase the material wealth and
prosperity of that whole section of the country.").

The current version of the Irrigation District Law
retains the original purpose and structure, enabling owners
of irrigable land to petition for the formation of an irrigation
district. See ORS 545.025(1) ("When owners of land that is
irrigated or susceptible to irrigation desire to provide for the
construction of works for irrigation of their land [or] to pro-
vide for the reconstruction, betterment, extension, purchase,
operation or maintenance of works already constructed,
\* \* \* they may propose the organization of an irrigation dis-
trict under the Irrigation District Law * * *. "). Once formed,
the district is governed by an elected board of directors. ORS
545.041; ORS 545.135. Among other duties, the board must
"[e]stablish equitable bylaws, rules and regulations * * * for
the distribution and use of water among the landowners."
ORS 545.221(1)(c). To fulfill its duties, the board has "the
right to acquire by lease, purchase, condemnation, or other
legal means, all lands, water, water rights, rights of way,
easements and other property * * * necessary for the con-
struction, use, supply, maintenance, repair and improvement
of any canals or works proposed to be constructed by the
board." ORS 545.239(1). Relatedly, "[t]he board also has the

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right to so acquire lands * * * for reservoirs, and the right to
store water in constructed reservoirs, for the storage of need-
ful waters, or for any other purpose reasonably necessary for
the purposes of the district." The legal title to all such prop-
erty "vest[s] in the irrigation district and [is] held by it in
trust for and * * * is dedicated and set apart to the uses and
purposes set forth in the Irrigation District Law[,]" and "[t]he
board is authorized and empowered to hold, use, acquire,
manage, occupy, possess and dispose of the property as pro-
vided in the Irrigation District Law." ORS 545.243.

When considered against the historical backdrop
described in this section, the preceding provisions of the
Irrigation District Law are fundamental to our analysis of
the issue presented. Viewed broadly, that issue is a recurring
one in the western states, namely, whether the ownership of
water rights resides with a water organization or its mem-
bers. This court previously has addressed the issue in two
cases involving entities other than irrigation districts. See
In re Waters of Walla Walla River, 141 Or 492, 498, 16 P2d
939 (1932) (concluding private irrigation company owned
water rights); Eldredge v. Mill Ditch Co., 90 Or 590, 596-97,
177 P 939 (1919) (concluding stockholders of mutual water
company owned water rights). Likewise, the highest courts of
other western states have encountered the issue in diverse
contexts and arrived at differing conclusions.11

11 Compare East Jordan Irr. Co. v. Morgan, 860 P2d 310, 313, 316 (Utah 1993)
(concluding mutual water corporation owned water rights such that shareholder
not authorized to change point of diversion absent corporation's consent); Madera
Irr. Dist. v. All Persons, Etc., 47 Cal 2d 681, 692-93, 306 P2d 886 (1957) (concluding
former landowners in irrigation district organized under Wright Act did not have
right to use water provided by district on lands excluded from district);
Consolidated People's Ditch Co. v. Foothill Ditch Co., 205 Cal 54, 64, 269 P 915
(1928) (concluding shareholder (irrigation district) in various mutual water corpo-
rations did not have right to change points of diversion associated with water pro-
vided by corporations); and Jenison v. Redfield, 149 Cal 500, 503-04, 87 P 62 (1906)
(concluding landowner in irrigation district organized under Wright Act did not
have right to use water provided by district on land outside district); with
Wadsworth Ditch Co. v. Brown, 39 Colo 57, 61-62, 88 P 1060 (1907) (concluding
shareholder of mutual ditch company authorized to change point of diversion;
"[t]he right to change [the point of diversion] is a property right. [It] belongs to the
stockholder (consumer) in a mutual ditch company as fully as to any other appro-
priator"); and Slosser v. Salt River Val. Canal Co., 7 Ariz 376, 395-96, 65 P 332
(1901) (concluding ownership of land essential to appropriative rights such that
nonlandowning private irrigation corporation did not own such rights).

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Ultimately, our resolution of the issue in this case-
i.e., our interpretation of the phrase "holder of any water use
subject to transfer" in ORS 540.510(1)-is controlled by the
intent of our legislature as expressed in the Water Rights Act
and the Irrigation District Law.12 We turn to that inquiry.

### III. DISCUSSION

We approach our interpretive task under our now
familiar methodology, examining the statutory text in its
context. PGE v. Bureau of Labor and Industries, 317 Or 606,
610, 859 P2d 1143 (1993). Terms of common usage within the
text are given their plain, natural, and ordinary meaning, id.
at 611, and our analysis of context encompasses "provisions
of the same statute and related statutes * * * as well as the
preexisting common law and the statutory framework within
which the law was enacted." Denton and Denton, 326 Or 236,
241, 951 P2d 693 (1998).

As noted, ORS 540.510(1) provides, in part:

"Except as provided in subsections (2) to (8) of this sec-
tion, 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 provi-
sions 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.) The parties' arguments on review con-
cern whether Ken-Wal or the district is the "holder of [a]

12 We are mindful that some irrigation districts restrict their members' author-
ity to change a point of diversion through regulations or contractual provisions-
e.g., districts formed pursuant to the federal Carey Act, 43 USC § 641 (1894). Our
holding in this case regarding Ken-Wal's authority to change the disputed points of
diversion-which, as noted, rests on our interpretation of the phrase "holder of any
water use subject to transfer" in ORS 540.510(1)-does not concern such restric-
tions.

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water use subject to transfer" within the meaning of that pro-
vision. We initially discuss those arguments before engaging
in our own independent analysis of the statute. See Stull v.
Hoke, 326 Or 72, 77, 948 P2d 722 (1997) ("In construing a
statute, this court is responsible for identifying the correct
interpretation, whether or not asserted by the parties.").

#### A. The Parties' Arguments

The parties' arguments generally proceed from the
premise that the "holder of [a] water use subject to transfer"
in this case is the party with an ownership interest in the
water rights established in certificates 8942 and 8943.13

Ken-Wal and the commission contend that the
"holder of [a] water use subject to transfer" is the party that
puts the water provided under certificates 8942 and 8943 to
beneficial use on the land to which the water rights are
appurtenant. That is, they assert that, despite the fact that
the certificates were issued to the district, Ken-Wal holds the
ownership interest in the water rights established in those
certificates-and thus is the "holder" for purposes of ORS
540.510(1)-because (1) Ken-Wal alone beneficially uses the
water provided under the certificates; and (2) Ken-Wal owns
the land on which that certificated water is used (i.e., a por-
tion of the appurtenant land). According to Ken-Wal and the
commission, the district cannot be considered the "holder of
[a] water use subject to transfer," because it neither benefi-
cially uses the water provided under the certificates nor owns
any of the appurtenant land.14

13 It is possible that the arguments of Ken-Wal and the commission may be con-
strued as asserting that the "holder of [a] water use subject to transfer" is the party
with an ownership interest in the use of the water provided under certificates 8942
and 8943, rather than the party with an ownership interest in the water rights
established in those certificates. We address that position below.

14 In addition to its arguments concerning the ownership of the water rights
established in certificates 8942 and 8943, Ken-Wal contends that a district cannot
be a "holder of [a] water use subject to transfer" within the meaning of ORS
540.510(1), because that provision assertedly treats "the holder" and "a district" as
distinct terms. That is, Ken-Wal draws attention to the fact that the second sen-
tence of ORS 540.510(1) addresses the authority of "the holder" to make various
changes, and the third sentence separately provides: "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." We reject Ken-Wal's assertion that the two
terms are mutually exclusive. Rather, ORS 540.510(1) contemplates that a "dis-
trict" is a type of "holder" authorized to change the place of use "in the manner

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In contrast, the district founds its claim to the own-
ership interests in the water rights established in certificates
8942 and 8943 on (1) the fact that the certificates were issued
to it; and (2) the implications of the trust relationship that
exists between it and its members like Ken-Wal. The district
rejects the proposition that Ken-Wal can be considered the
"holder of [a] water use subject to transfer" on the grounds of
beneficial use or the ownership of a portion of the appurte-
nant land.

#### B. Analysis

We engage in a three-part analysis to determine
whether Ken-Wal or the district is the "holder of [a] water use
subject to transfer" with respect to certificates 8942 and
8943. Our analysis is successive. Each part addresses a spe-
cific aspect of that phrase that, once examined, sheds light on
the meaning of the phrase as a whole. We first briefly analyze
the interest that the "holder" has in the "water use subject to
transfer." Next, we consider the statutory definition of "water
use subject to transfer" in ORS 540.505(4). And, finally, we
determine which party is the "holder of [a] water use subject
to transfer" by measuring the parties' arguments against the
statutory text and context.

##### 1. The Interest of the "Holder"

As described above, the Court of Appeals concluded
that the phrase "holder of any water use subject to transfer,"
as used in ORS 540.510(1), refers to a party that has a pos-
sessory or ownership interest in the right to use of the water
provided under a water right certificate. On review, the par-
ties do not appear to dispute that the holder's interest in the
"water use subject to transfer" is possessory in nature. The
dictionary bears out that interpretation, defining "holder," in

provided in ORS 540.572 to 540.580 [or by] the method provided in ORS 540.520
and 540.530."

Relatedly, we also reject without further discussion any suggestion made by
Ken-Wal that a district cannot be considered the "holder of [a] water use subject to
transfer" under ORS 540.510(1) based on contextual provisions in ORS chapter 540
governing district participation in, and consent to, proposed water right transfers.
See, e.g., ORS 540.570 (district-initiated temporary transfers of place of use); ORS
540.572 (district-initiated permanent transfers of place of use due to lack
of beneficial use or nonirrigability of appurtenant land); ORS 540.580 (district-
initiated permanent transfers of place of use).

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part, as "one that holds something: as a (1): POSSESSOR,
OWNER * **. " Webster's Third New Int'l Dictionary 1079
(unabridged ed 2002). Similarly, Webster's defines "hold," in
part, as "to retain in one's keeping: maintain possession of
\* \* \* POSSESS, HAVE ***. " Id. at 1078. In short, both def-
initions favor an interpretation of the phrase "holder of any
water use subject to transfer" under which the "holder" has
an ownership interest in the "water use subject to transfer."

The more challenging question is which party is the
"holder of [a] water use subject to transfer" relevant to certif-
icates 8942 and 8943. As to that question, we first examine
the statutory definition of the phrase "water use subject to
transfer."

2\. The "Water Use Subject to Transfer"

ORS 540.505(4) provides the following four-part
definition:

" 'Water use subject to transfer' means a water use
established by:

"(a) An adjudication under ORS chapter 539 as evi-
denced by a court decree;

"(b) A water right certificate;

"(c) A water use permit for which a request for issu-
ance of a water right certificate under ORS 537.250 has
been received and approved by the Water Resources Com-
mission under ORS 537.250; or

"(d) A transfer application for which an order approv-
ing the change has been issued under ORS 540.530 and for
which proper proof of completion of the change has been
filed with the Water Resources Commission."

(Emphases added.) There is no dispute among the parties
that this case solely concerns paragraph (b): "a water use
established by * * * [a] water right certificate." That is, the
"water use subject to transfer" at issue consists of the water
use established by each of the certificates issued to the dis-
trict. ORS 540.510(1) exclusively authorizes the "holder" of
the water use established by each certificate to change the
associated point of diversion.

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As we understand their arguments, a potential dis-
agreement between the parties concerns the term "use" in
the phrase "a water use established by * * * [a] water right
certificate." A "water use established by * * * [a] water right
certificate" arguably could refer to either (1) the right to use
water established by a water right certificate (i.e., the certif-
icated water right); or (2) the use of water provided under a
water right certificate. The first interpretation contemplates
that the "holder" has an ownership interest in the certificated
water right. Under the second interpretation, the "holder"
has only an ownership interest in the use of the certificated
water, regardless of the ownership of the water right itself. In
part, Ken-Wal and the commission appear to advocate the
latter interpretation, contending that Ken-Wal is the
"holder" on the ground that it has an ownership interest in
the use of the water provided under certificates 8942 and
8943.15

We begin our analysis of the legislature's intended
meaning by examining the historical development of the cur-
rent statutory phrase "holder of any water use subject to
transfer" in ORS 540.510(1). See Krieger v. Just, 319 Or 328,
336, 876 P2d 754 (1994) ("[W]ording changes adopted from
session to session are a part of context of the present version
of the statute being construed.").

The first version of the transfer provision now codi-
fied at ORS 540.510(1) was enacted in 1909 as part of the
original Water Rights Act, providing, in part:

"[I]f for any reason it should at any time become impracti-
cable to beneficially or economically use water for the irri-
gation of any land to which the water is appurtenant, said
right may be severed from said land, and simultaneously
transferred, and become appurtenant to other land, with-
out losing priority of right theretofore established, * * * on
the approval of an application of the owner to the Board of
Control."

15 For example, in its brief on the merits filed in this court, Ken-Wal argues, in
part, that the district cannot be considered a "holder of [a] water use subject to
transfer" because the district assertedly does not have "a possessory or ownership
interest in the use of the water" provided under certificates 8942 and 8943.

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Or Laws 1909, ch 216, § 65 (emphases added). The first ver-
sion of the transfer provision thus used the term "owner" in
association with the term "right," authorizing the owner of a
water right to pursue a transfer by filing an application with
the Board of Control.

The transfer provision began to resemble its current
form in the 1927 version, which provided, in part:

"[T]he owner of any water right may, upon compliance with
the provisions of this act, 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 there-
tofore established."

Or Laws 1927, ch 219, § 1 (emphasis added). Notwithstand-
ing the fact that its phrasing differed from the first version,
the 1927 version retained the term "owner" in association
with the term "right" (i.e., "water right"), authorizing the
"owner of any water right" to pursue the changes currently
provided for in ORS 540.510(1).

With only a minor modification, the third version of
the transfer provision was enacted in 1991 and codified in
ORS 540.510(1), providing, in part:

"[T]he owner of any certificated water right may, upon com-
pliance 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."

Or Laws 1991, ch 957, § 7(1) (emphasis added). While retain-
ing the terms "owner" and "right" in the phrase "owner of any
certificated water right," the 1991 version of the transfer pro-
vision was distinct in its exclusive focus on "certificated"
water rights. That transfer provision authorized only the
"owner of [a] certificated water right" to change the associ-
ated use, place of use, and point of diversion.

The legislature enacted the current version of the
transfer provision in 1995. Or Laws 1995, ch 274, § 2. The
same act that amended ORS 540.510(1) to include the phrase
"holder of any water use subject to transfer" also amended
ORS 540.505 to include the four-part definition of the phrase
"water use subject to transfer" that, notwithstanding a minor

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amendment in 1997 (Or Laws 1997, ch 42, § 2), exists at pres-
ent. Or Laws 1995, ch 274, § 1. Thus, the legislature aban-
doned the exclusive focus on certificated water rights in the
1991 version of ORS 540.510(1) by deleting the phrase
"owner of any certificated water right," substituting the
phrase "holder of any water use subject to transfer," and
enacting a four-part definition of the phrase "water use sub-
ject to transfer" that extended beyond certificated water
rights.

The definitions of the phrase "water use subject to
transfer" in ORS 540.505(4)(a) to (d) shed light on the inclu-
sion of terms "holder" and "use" in the phrase "holder of any
water use subject to transfer" in ORS 540.510(1). As
explained in detail below, the procedures in ORS chapter 537
that govern the acquisition of an appropriative right provide
that the issuance of a water right certificate is the act that
vests a certificated water right in a party. See, e.g., ORS
537.250(3) (describing significance of issuance of water right
certificate). Before the issuance of a certificate, the prospec-
tive appropriator holds only an inchoate right that, although
it may allow for water use, does not constitute a vested water
right. See, e.g., Green v. Wheeler, 254 Or 424, 430-31, 458 P2d
938 (1969), cert den, 397 US 990 (1970) (explaining appropri-
ative right does not vest prior to issuance of certificate).
The appearance of the terms "holder" and "use" in ORS
540.510(1) must be considered in light of the fact that the def-
initions of the phrase "water use subject to transfer" in ORS
540.505(4)(c) and (d) both involve water "rights" that are
inchoate in nature.

ORS 540.505(4)(c) involves a "water use permit for
which a request for issuance of a water right certificate * * *
has been received and approved by the Water Resources
Commission * * *. " A party in the precise position identified
in paragraph (c) has completed every step in the application
process that precedes the issuance of a water right certificate.
ORS 537.130; ORS 537.140(1); ORS 537.230(1); ORS
537.230(4). However, until the department issues the certifi-
cate, the party's water use permit establishes an inchoate,
rather than a vested, water right.

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ORS 540.505(4)(d) presents the same situation with
regard to a transfer application. That provision contemplates
that the commission has issued an order approving the appli-
cation, ORS 540.530(1)(a), and that the applicant has filed a
proper proof of completion, ORS 540.530(2)(a). Nonetheless,
the commission has not yet issued the certificate that incor-
porates the changes effected by the transfer, see id., and thus
the application falls short of establishing a vested water
right.16

Ultimately, the usage of the terms "holder" and "use"
in the phrase "holder of any water use subject to transfer"
tracks the extension of the transfer provision to the inchoate
rights identified in ORS 540.505(4)(c) and (d). The appear-
ances of the terms "owner," "right," "water right," and "certif-
icated water right" in the earlier versions of the transfer pro-
vision make sense given that those provisions did not extend
to water rights that were inchoate in nature. Conversely,
however, the usage of those terms in reference to a party's
possession of the "rights" established by the water use permit
and transfer application in ORS 540.505(4)(c) and (d) would
disregard the inchoate nature of those "rights." The inclusion
of the terms "holder" and "use" in the phrase "holder of any
water use subject to transfer" accounts for the foregoing con-
sideration, rather than favoring an interpretation of the
phrase "a water use established by * * * [a] water right cer-
tificate" that contemplates a "user" ("holder") of water pro-
vided under a water right certificate having authority to alter
the associated water right.

The appearance of the phrase "water use subject to
transfer" throughout ORS chapter 540 also sheds light on the
meaning of the phrase "a water use established by * * * [a]
water right certificate" in ORS 540.505(4). For example, ORS
540.520, which governs applications for changes of use, place
of use, and point of diversion, provides, in part:

16 For applicants other than irrigation districts, ORS 540.530(2) provides that
the commission "shall cancel [any] previous certificate * * * [and] issue a new cer-
tificate" when a proper proof of completion of the authorized changes has been
filed. For irrigation district applicants, ORS 540.530(2)(a) authorizes the commis-
sion to modify any previous certificate in lieu of issuing a new certificate upon filing
of a proper proof of completion.

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"(8) An application for a change of use under this sec-
tion is not required if the beneficial use authorized by the
water use subject to transfer is irrigation and [additional
conditions are met]."

(Emphasis added.) That provision treats "beneficial use" and
the "water use [established by a water right certificate]" as
distinct from one another; the former is authorized by the lat-
ter. Similarly, ORS 540.523(3), which governs temporary
transfers in the place of use and associated points of diver-
sion, provides:

"All uses of water for which a temporary transfer is
allowed under this section shall revert automatically to the
terms and conditions of the water use subject to transfer
upon expiration of the temporary transfer period."

(Emphases added.) Again, the "use[ ] of water" is identified
distinctly from the "water use [established by a water right
certificate]." The terms and conditions of the latter dictate
the use of the water. ORS 540.531, which authorizes the
transfer of a surface water point of diversion to allow the
appropriation of ground water, provides additional context,
stating, in part:

"(2) The Water Resources Department may allow a
transfer of the point of diversion under subsection (1) of this
section if:

***** *

"(a)(C) The use of the new point of diversion will affect
the surface water source similarly to the authorized point of
diversion specified in the water use subject to transfer
\* \* \* \* 17

(Emphases added.) The authorized point of diversion is "spec-
ified in the water use [established by a water right certifi-
cate]," which, again, describes the authorized point of diver-
sion as a term of the certificated water right. Finally, ORS
540.570(1)(b), which authorizes districts to temporarily
change the place of use associated with water provided under

17 ORS 540.531(2)(a)(D) and (3)(c) also contain the phrase "specified in the
water use subject to transfer." See also ORS 540.585(1)(b) ("The type of use speci-
fied in the original water use subject to transfer is irrigation[.]").

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certificated water rights, states, in part, that such a transfer
may occur if:

"The type of use authorized under the water use subject
to transfer remains the same * * * "18

(Emphasis added.) Again, the "water use [established by a
water right certificatel" authorizes the "type of use" and thus
is distinct from it.

In sum, the manner in which the phrase "water use
subject to transfer" is used in the foregoing provisions does
not support a construction of the phrase "a water use estab-
lished by * * * [a] water right certificate" in ORS 540.505(4)
that equates the term "a water use" with the use of water pro-
vided under a certificate, rather than the certificated water
right itself.

Finally, the meaning of the phrase "a water use
established by * * * [a] water right certificate" in ORS
540.505(4) must be considered in relation to the changes that
ORS 540.510(1) authorizes the "holder" to make, namely,
changes to "the use and place of use, the point of diversion or
the use theretofore made of the water" provided under a
"water use subject to transfer." This court's case law recog-
nizes those features as elements of an appropriative right.

"The elements of an appropriation of water * * * are:
'(a) Quantity of water appropriated; (b) time, period, or sea-
son when the right to the use exists; (c) the place upon the
stream at which the right of diversion attaches; (d) the
nature of the use or the purpose to which the right of use
applies, such as irrigation, domestic use, culinary use, com-
mercial use, or otherwise; (e) the place where the right of
use may be applied; [and] (f) the priority date of appropria-
tion or right as related to other rights and priorities.'"

Tudor v. Jaca et al., 178 Or 126, 142-43, 164 P2d 680 (1945)
(quoting Rocky Ford Canal Co. v. Cox, 59 P2d 935, 939 (Utah

18 See also ORS 540.580(1)(a), (b) (permitting district-initiated petition for per-
manent change in place of use if, among other requirements, "[t]he rate, duty and
total number of acres to which water is to be applied under the water use subject to
transfer are not exceeded," and "[t]he use authorized under the water use subject to
transfer remains the same") (emphases added)).

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1936). ORS 537.140 likewise reflects those features as ele-
ments, requiring that an application for an appropriative
right-i.e., an "application for a permit to appropriate
water"-identify, inter alia, "the nature and amount of the
proposed use; * * * the location and description of the pro-
posed ditch, canal, or other work * * *; [and,] [i]f for agricul-
tural purposes, * * * the legal subdivisions of the land and
acreage to be irrigated * **. " ORS 537.140(1)(a)(C), (D),
(I)(b).

Applied in situations like the present one, where the
"water use subject to transfer" is "a water use established by
\* \* \* [a] water right certificate," ORS 540.510(1) thus author-
izes the "holder" to change the elements of the certificated
water right under which water is provided. In light of that
fact, it is apparent that the interpretation asserted by
Ken-Wal and the commission-i.e., that the phrase "a water
use established by * * * [a] water right certificate" refers only
to the use of water provided under a certificate-assumes
that the "holder" has authority to change the elements of a
certificated water right in which the "holder" does not have
an ownership interest. We cannot accept that interpretation.
The more well-founded construction is that the phrase "a
water use established by * * * [a] water right certificate"
refers to the certificated water right itself, such that the
"holder" is authorized to change the elements of a certificated
water right in which the "holder" has an ownership interest.

To summarize, the "water use subject to transfer"
involved in this case is the water use established by each cer-
tificate issued to the district. In turn, the statutory context
supports the conclusion that the corresponding definition
of the phrase "water use subject to transfer" in ORS
540.505(1)(b)-"a water use established by * * * [a] water
right certificate"-refers to the certificated water right itself,
not merely the use of the water provided under the certifi-
cate. That is, the context indicates that the "holder" must
have an ownership interest in the right to use water estab-
lished by a water right certificate, not merely an ownership
interest in the use of the water provided under the certificate
while the ownership of the water right resides with another
party.

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##### 3. The "Holder"

Having determined that the phrase "holder of any
water use subject to transfer" in this case refers to a party
with an ownership interest in the water rights established by
certificates 8942 and 8943, we must now address the pivotal
question of which party is the "holder." To provide an answer,
we examine the four grounds on which the parties rely in
their competing claims to ownership: (1) the issuance of the
water right certificates; (2) the trust relationship that exists
between the district and Ken-Wal; (3) the beneficial use of the
water provided under the certificates; and (4) the ownership
of the appurtenant land.

#### a. Issuance of the Water Right Certificates

Numerous statutory provisions bear on the district's
argument that it is the "holder of [a] water use subject to
transfer"-i.e., the party with an ownership interest in the
water rights established by certificates 8942 and 8943-
based on the issuance of those certificates.

As noted above, irrigation districts are authorized to
own water rights:

"The board [of directors] also has the right to acquire by
lease, purchase, condemnation or other legal means, all
lands, water, water rights, rights of way, easements and
other property * * * necessary for the construction, use, sup-
ply, maintenance, repair and improvement of any canals
and works proposed to be constructed by the board."

ORS 545.239(1) (emphases added). See also ORS 545.367
(authorizing board of directors to sell property "owned by the
district and not required for district purposes," including
"water or water rights"); ORS 537.099 (requiring annual
water use reports from "any governmental entity that holds a
water right," including "irrigation district[s] formed under
ORS chapter 545 * * * "). Likewise, irrigation districts can
obtain water right certificates in accordance with the proce-
dures set forth in ORS chapter 537. See, e.g., ORS 537.250(2)
(describing issuance of water right certificates to irrigation
districts); ORS 537.252(1) (same); ORS 540.510(4) (providing
for application of "water used under a permit or certificate
issued to a district" on nonappurtenant lands). The ORS

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chapter 537 procedures identify the relationship between the
ownership of a certificated water right and the issuance of a
water right certificate.

Since enactment of the Water Rights Act in 1909, the
ORS chapter 537 procedures constitute the exclusive means
by which an irrigation district (or any other prospective
appropriator) can acquire a "new" appropriative right, not-
withstanding the ability of districts to obtain existing appro-
priative rights by lease, purchase, or condemnation. See ORS
537.120 ("[A]]] waters within the state may be appropriated
for beneficial use, as provided in the Water Rights Act and
not otherwise * * * " (emphasis added)); ORS 537.130(1)
("[A]ny person intending to acquire the right to the beneficial
use of any of the surface waters of this state shall * * * make
an application to the [department] for a permit to make the
appropriation."); ORS 537.130(2) ("[A] person may not use,
store or divert any waters until after the department issues a
permit to appropriate the waters.").

This court has described the exclusive nature of the
ORS chapter 537 procedures, and the relationship between
those procedures and the method of acquiring appropriative
rights that existed prior to their enactment, as follows:

"Prior to the water code of 1909[,] the appropriation of
water in Oregon was recognized as a method of creating a
vested interest in the waters of a stream. But the adoption
of the water code introduced a new concept of establishing
one's right to water. All waters in Oregon were declared to
belong to the public subject to existing rights (ORS 537.110)
and although such waters were declared to be subject to
appropriation, they were appropriable only 'as provided in
the Water Rights Act and not otherwise * * * ' (ORS
537.120.) Appropriation alone was no longer enough to
establish a vested right in the waters of the state; the water
code required, and still requires, the fulfillment of other
conditions before a water right will vest in the appropriator.
Various sections of the water code make this clear. The plan
of the statute is to recognize vested rights in water not sim-
ply where there is an appropriation but when the 'appropri-
ation has been perfected.' Thus ORS 537.250 provides that
a water right certificate shall be issued upon it appearing to

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the satisfaction of the State Engineer 'that an appropria-
tion has been perfected in accordance with the provisions of
the Water Rights Act.'"

Green, 254 Or at 430-31 (emphasis omitted). The process of
obtaining a water right for irrigation purposes proceeds in
stages, and, as described in Green, that process culminates in
the department's issuance of a certificate to the applicant/
permittee.

Initially, a party applies to the department for a per-
mit to appropriate water, identifying, in part, the elements of
the water right described above (amount, type, place of use,
and point of diversion). ORS 537.140(1). If the department
approves the application, it issues a permit authorizing the
permittee to construct irrigation works and to "take all action
required to apply the water to the designated beneficial use
and to perfect the proposed appropriation." ORS 537.211(1).
As described above, the permit itself does not represent a per-
fected and vested water right, even when the permitted
water is put to beneficial use. See Teel Irrigation Dist. v.
Water Resources Dept., 323 Or 663, 667, 919 P2d 1172 (1996)
("The permit itself does not represent a perfected and vested
water right."); Green, 254 Or at 430 ("It seems clear to us that
the legislative assembly intended the water right certificate,
not the permit, even when followed by a beneficial use, to
mark the point at which the water right becomes vested.").

After the issuance of a water right permit, the
"holder" of the permit is required to construct irrigation
works with reasonable diligence, generally not to exceed five
years. ORS 537.230(1), (3). Once construction is completed,
ORS 537.230(4) provides that, (1) "upon completion of bene-
ficial use * * * , the permittee shall hire a water right exam-
iner * * * to survey the appropriation"; and (2) "[w]ithin one
year after application of water to a beneficial use or the ben-
eficial use date allowed in the permit, the permittee shall
submit a map of the survey * * * , which shall accompany the
request for a water right certificate * * *. " If the permittee
fails to complete the construction work or apply the permit-
ted water to beneficial use in a timely manner, the permit

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may be canceled. ORS 537.410(1). If the department deter-
mines that "an appropriation has been perfected in accor-
dance with the provisions of the Water Rights Act," how-
ever, the department issues a certificate to the applicant/
permittee. ORS 537.250(1).

To reiterate, ORS 537.250(3) describes the signifi-
cance of the department's issuance of a water right certificate
as follows:

"Rights to the use of water acquired under the provisions
of the Water Rights Act, as set forth in a certificate issued
under subsection (1) of this section, shall continue in the
owner thereof so long as the water shall be applied to bene-
ficial use under and in accordance with the terms of the cer-
tificate * * *. "

(Emphases added.) Likewise, citing ORS 537.250(3), this
court previously has stated that "[t]he certificate represents a
vested, perfected water right that continues so long as the
water is applied to a beneficial use in accordance with the
terms of the certificate * * *. " Teel Irrigation Dist., 323 Or at
668.

The foregoing context supports the conclusion that
the party that holds an ownership interest in a certificated
water right-i.e., the "holder"-is the party that undertook
the procedures in ORS chapter 537 that culminated in the
issuance of the certificate. Stated differently, the depart-
ment's issuance of a certificate appears to be the act that
vests the ownership interest associated with a certificated
water right in the party to which the certificate is issued. The
contested certificates in this case reflect as much.

Certificates 8942 and 8943, and the documents lead-
ing up to the issuance of those certificates (the water right
permit applications, water right permits, and proofs of appro-
priation), demonstrate that the district, not Ken-Wal, under-
took the ORS chapter 537 procedures to acquire the associ-
ated water rights.19 Both certificates state:

19 Certificate 8943 and its preceding documents (the application for a water
right permit, the water right permit, and the proof of appropriation) are not in the
record. The originals of those documents are contained in the official files of the
department. Accordingly, we take judicial notice of those documents, as they are
not subject to reasonable dispute. See OEC 201(b)(2) (so permitting).

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"This is to Certify, That FORT VANNOY IRRIGATION
DISTRICT * * * has made proof to the satisfaction of the
STATE ENGINEER of Oregon, of a right to the use of the
waters of [Rogue River/Dutcher Creek] * * * for the purpose
of [Irrigation] under [Permit No. 9692/9693] * * * , and that
said right to the use of waters has been perfected in accor-
dance with the laws of Oregon * * *. "

The certificates then describe the elements of the certificated
water rights, including the amount, type, place of use, and
the point of diversion.

In sum, the fact that the district engaged in the stat-
utory procedures that are the exclusive means for acquiring
certificated water rights-which is unambiguously reflected
in the certificates and the preceding documents-supports
the conclusion that the district is the "holder" of the water
rights established in certificates 8942 and 8943.20 Notwith-
standing that conclusion, Ken-Wal's beneficial use of the
water provided under those certificates-as well as the per-
mits that preceded those certificates-is an essential act in
the creation and maintenance of the water rights, which is an
important point that we consider below. Before turning to it,
however, we analyze in more detail the district's ownership
interests in the certificated water rights by examining the
trust relationship between the parties and the implications of
that relationship on the ownership interests.

#### b. Trust Relationship

The fact that certificates 8942 and 8943 were issued
to the district subjects the ownership interest in each certifi-
cated water right to the parties' trust relationship. As noted
above, that relationship is established in ORS 545.253, which
provides that water rights acquired by an irrigation district
pursuant to ORS 545.239 are trust property:

"The legal title to all property acquired under ORS
545.239 * * * shall immediately vest in the irrigation dis-
trict and shall be held by it in trust for and hereby is dedi-
cated and set apart to the uses and purposes set forth in the

20 See East Jordan Irr. Co., 860 P2d at 313 (reasoning, in part, that shareholder
in mutual water corporation did not own water rights because shareholder did not
engage in statutory appropriation procedures).

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Irrigation District Law. The board [of directors] is author-
ized and empowered to hold, use, acquire, manage, occupy,
possess and dispose of the property as provided in the Irri-
gation District Law."

ORS 545.253 (emphases added). Similarly, this court has
held that "[t]he relationship between an irrigation district
and its constituent landowners as to the water rights and
other property of such district is that of trustee and cestuis
que trustent."21 Smith v. Enterprise Irrigation Dist., 160 Or
372, 378-79, 85 P2d 1021 (1939).

The existence of the trust relationship bifurcates the
ownership interest in each certificated water right. See Allen
v. Hendrick, 104 Or 202, 223-24, 206 P 733 (1922) ("A trust
implies two estates ;- one legal, and the other equitable; it
also implies that the legal title is held by one person, the trus-
tee, while another person, the cestui que trust, has the bene-
ficial interest * * *. "). The district holds legal title to the
water right as trustee, and the members hold equitable title
as the beneficiaries. Acting in a fiduciary capacity, the dis-
trict's duties as trustee include management of the water
right and the water that it provides, and the members enjoy
the use of that water as their beneficial interest. See ORS
545.221(1)(c) ("The board [of directors] shall * * * [e]stablish
equitable bylaws, rules and regulations * * * for the distri-
bution and use of water among the landowners."); ORS
545.253 (authorizing board of directors to "hold, use, [and]
manage * * * property as provided in the Irrigation District
Law," including water and water rights acquired pursuant to
ORS 545.239); ORS 540.570(1) (authorizing district-initiated
temporary transfers in place of use for one irrigation season);
ORS 540.572(1), (2) (authorizing district-initiated permanent
transfers in place of use due to nonirrigability of appurtenant
land or lack of beneficial use).

The parties' roles and ownership interests under the
trust relationship inform our interpretation of the phrase
"holder of any water use subject to transfer" as applied in this

21 "Cestui que trust" and "cestuis que trustent" are defined as, "[o]ne who pos-
sesses equitable rights in property * * * BENEFICIARY." Black's Law Dictionary
243 (8th ed 2004).

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case. Those aspects of the trust relationship must be consid-
ered in light of the fact that ORS 540.510(1) authorizes the
"holder" to make fundamental changes-i.e., "change the use
and place of use, the point of diversion or the use theretofore
made of the water"-to the certificated water rights as trust
property. Given that authority, notwithstanding Ken-Wal's
equitable ownership interest, the phrase "holder of any water
use subject to transfer" cannot be construed as referring to
Ken-Wal, because such a construction would run afoul of the
trust relationship by permitting a beneficiary to manage the
trust property. In contrast, construing that phrase to refer to
the district is consistent with the parties' trust relationship,
because the changes that ORS 540.510(1) authorizes impli-
cate the trustee's duty to manage the trust property for the
sake of all of the beneficiaries.

#### c. Beneficial Use

Ken-Wal's and the commission's arguments regard-
ing beneficial use-i.e., that Ken-Wal is the "holder" of the
water rights established in certificates 8942 and 8943 on the
ground that it is the sole beneficial user of the water provided
under those certificates-stand in sharp contrast to the con-
clusion supported by the analyses above. Beneficial use
indeed is the foundation of an appropriative right. See ORS
540.610(1) ("Beneficial use shall be the basis, the measure
and the limit of all rights to the use of water in this state.").
Relatedly, beneficial use is essential to the acquisition and
maintenance of certificated water rights. See ORS 537.230(4)
(conditioning issuance of certificate on beneficial use of water
under water right permit); ORS 537.250(3) (conditioning
maintenance of certificated water rights on beneficial use
under terms of certificate). Nonetheless, in the particular cir-
cumstances of this case, two aspects of the statutory context
must be considered when evaluating the contentions of
Ken-Wal and the commission that Ken-Wal is the "holder" on
the ground of beneficial use.

First, as previously explained, the ORS chapter 537
procedures require more than beneficial use to acquire a cer-
tificated water right. See, e.g., ORS 537.130(1) (requiring
submission of water right permit application to the depart-
ment prior to actions effecting proposed appropriation); ORS

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537.230(1) (requiring water right permit holder to construct
irrigation works with reasonable diligence); ORS 537.230(4)
(requiring survey of appropriation and submission of survey
map and request for water right certificate); Green, 254 Or at
430-31 (describing vesting of water right under Water Rights
Act requires fulfillment of conditions beyond appropriation
itself). Those procedures demonstrate that the beneficial use
of the water provided under permits 9692 and 9693 was a
necessary, but not sufficient, condition for the acquisition of
the water rights later established in certificates 8942 and
8943.22 For its part, the district was responsible for construct-
ing the irrigation works that channel water to Ken-Wal's
land, as well as tending to the permit applications, the appro-
priation survey and survey map, and the requests for the
water right certificates. Thus, beneficial use of the permitted
water was only one action within the joint effort required to
bring the certificated water rights into existence.

Second, relevant to both the acquisition and the sub-
sequent maintenance of the certificated water rights,
Ken-Wal's beneficial use of the water can be considered part
of an agency relationship between it and the district. This
court's case law and the provisions of the Water Rights Act
and Irrigation District Law favor the existence of an agency
relationship in these circumstances.

In a line of cases originating before the enactment of
the Water Rights Act in 1909, this court has held that bene-
ficial use may be accomplished through an agency relation-
ship. The court stated early on in Nevada Ditch Co .:

"We take it, therefore, that the bona fide intention which is
required of the appropriator to apply the water to some use-
ful purpose may comprehend a use to be made by or through
another person * **. Thus the appropriator is enabled to
complete and finally establish his appropriation through the
agency of the user."

22 It is unclear from the record whether the permitted water was beneficially
used by Ken-Wal or a predecessor or predecessors of Ken-Wal. That fact, however,
is not essential to our conclusions that (1) the beneficial use of the permitted water
was insufficient for acquisition of the certificated water rights; and (2) Ken-Wal's
beneficial use of the certificated water is an inherent aspect of the district's own-
ership of the certificated water rights.

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30 Or at 97 (emphasis added). The court has reiterated that
view in several subsequent cases, most recently in Wilber v.
Wheeler, 273 Or 855, 861-62, 543 P2d 1052 (1975):

"It was the plan of the water law of 1891, and runs all
through the cases, that an appropriation may be made by
one person for the future use of another * * *. "

Id. at 861-62 (quoting In re Waters of Deschutes River, 134 Or
623, 655, 286 P 563 (1929); citing Re Water Rights of Hood
River, 114 Or 112, 137, 227 P 1065 (1924), and Nevada Ditch
Co., 30 Or at 89) (emphasis in original; internal quotation
marks omitted).

Specifically, in prior cases involving disputes
between water organizations (other than irrigation districts)
and their patrons over the ownership of water rights, this
court has held that beneficial use may be accomplished
through an agency relationship. See In re Waters of Walla
Walla River, 141 Or at 497-98 (concluding patrons acted as
agents when applying water to beneficial use and irrigation
company owned water rights); Eldredge v. Mill Ditch Co., 90
Or at 596-97 (concluding mutual water company acted as
agent of shareholders who put water to beneficial use and
owned water rights).

The provisions of the Water Rights Act and the
Irrigation District Law support the existence of an agency
relationship between the district and Ken-Wal in this case.
Three aspects of those provisions are relevant. First, as
described above, both laws contain provisions demonstrating
that districts can acquire and hold certificated water rights.
ORS 537.250(2), (3); ORS 545.239(1); ORS 545.253. Second,
the Water Rights Act hinges the acquisition and mainte-
nance of certificated water rights on beneficial use. ORS
537.230(4); ORS 537.250(3). And, third, although the Irriga-
tion District Law provides that districts may own land for the
purposes of supplying and distributing certificated water,
numerous provisions within that law demonstrate that it is
the members (like Ken-Wal) that own the land on which such
water is beneficially used.23 See, e.g., ORS 545.025(1) (identi-
fying that purpose of an irrigation district is to enable owners

23 In addition to providing water to the lands of their members, districts also
may furnish water to "lands not included within the district" and "lands within the

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of irrigable lands within proposed district's boundaries to
provide for works necessary to irrigate their lands); ORS
545.221(1)(c) (requiring board of directors to "[e]stablish
equitable bylaws, rules and regulations for the * * * distri-
bution and use of water among the landowners" (emphasis
added)); ORS 545.239(1) (authorizing board of directors to
acquire (1) lands "necessary for the construction, use, supply,
maintenance, repair and improvement of any canals and
works proposed to be constructed by the board"; and (2) lands
for reservoirs "for the storage of needful waters, or for any
other purpose reasonably necessary for the purposes of the dis-
trict" (emphases added)); ORS 545.253 (providing property
acquired by district under ORS 545.239 "is dedicated and set
apart to the uses and purposes set forth in the Irrigation
District Law").24

Taken together, the foregoing provisions support the
conclusion that an agency relationship exists between the
district and Ken-Wal with respect to the water rights estab-
lished in certificates 8942 and 8943. The district is author-
ized to acquire and hold those certificated water rights. Not-
withstanding that authority, however, it is Ken-Wal, not the
district, that owns the land on which the certificated water is
beneficially used. Accordingly, if the statutory provisions
authorizing the district to acquire and hold the certificated
water rights are to be given effect, it is inherent in the par-
ties' relationship that the district has maintained ownership
of the certificated water rights through Ken-Wal's beneficial
use of the certificated water. Put differently, because the dis-
trict's ownership of the certificated water rights is dependent
on the certificated water being put to beneficial use on
Ken-Wal's land, it is inherent in the district's ownership of
the certificated water rights that Ken-Wal acts as its agent.
To hold that Ken-Wal is the "holder of [a] water use subject to
transfer" on the ground of beneficial use in this case would be

district [that are] not subject to assessment by the district," upon receiving proper
compensation. ORS 545.271.

24 See also ORS 540.572(2) (authorizing district to seek permanent transfer of
water right under ORS 540.574 if a "water user of a district" has not beneficially
used water for five years); ORS 540.574(3) (requiring petition for district-initiated
permanent transfer of water right to include "names of all users within the district"
to and from whose land water rights are to be transferred).

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to eviscerate the district's statutory authority to own certifi-
cated water rights.

In our view, Ken-Wal's beneficial use of the water
provided under certificates 8942 and 8943 does not under-
mine the conclusion that the district is the "holder of [a]
water use subject to transfer" relevant to the water rights
established in those certificates. Beneficial use of the permit-
ted water was insufficient alone to bring the water rights into
existence under ORS chapter 537. Moreover, the court's long-
standing case law and the statutory provisions discussed
above demonstrate that the parties participate in an agency
relationship whereby the district has maintained ownership
of the certificated water rights through Ken-Wal's beneficial
use of the certificated water. We now turn to Ken-Wal's and
the commission's final argument regarding the ownership of
the appurtenant land.

#### d. Ownership of the Appurtenant Land

Like their contentions regarding beneficial use, the
arguments of Ken-Wal and the commission regarding the
ownership of the appurtenant land-i.e., that Ken-Wal is the
"holder" of the water rights established in certificates 8942
and 8943 because it owns a portion of the land to which those
water rights are appurtenant-also run contrary to the con-
clusion that the district is the "holder" based on the issuance
of the certificates and the parties' trust relationship. The cer-
tificated water rights are appurtenant to the land on which
the certificated water is applied to beneficial use. See ORS
540.510(1) ("[A]ll water used in this state for any purpose
shall remain appurtenant to the premises upon which it is
used * * *. "). That said, the argument that the ownership of a
certificated water right is controlled by the ownership of the
appurtenant land must be considered in light of the statutory
context.

For over a century, this court's cases interpreting the
Water Rights Act and its predecessors repeatedly have
rejected the proposition that the ownership of the appurte-
nant land is coextensive with the ownership of the appropri-
ative rights under which water is provided thereto. As
referred to earlier in relation to beneficial use, Wilber pro-
vides a thorough recitation of that legal principle.

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"There is nothing in ORS ch 537 which would prevent
someone from applying for water rights to land which they
do not own but do intend to irrigate. As this court stated in
In re Waters of Deschutes River, 134 Or 623, 655, 286 P 563
(1929), reh denied and opinion modified, 249 P 1049 (1930):

" 'It was the plan of the water law of 1891, and runs
all through the cases, that an appropriation may be
made by one person for the future use of another; and for
the future use upon lands which the appropriator does
not then own, or which he does not contemplate owning
and which he never does own. It is sufficient for the
validity of the appropriation if the original intention is,
that the water filed upon is for use upon certain lands
then definitely had in mind, and it is reasonably antici-
pated that when the diversion is ultimately completed
and the water ready for application to that land, or other
land or uses which have been substituted for the origi-
nally considered and intended land, such land will be
then, or with reasonable diligence thereafter ready to
receive it: [Nevada Ditch Co., 30 Or at 89; Re Water
Rights of Hood River, 114 Or at 137-38].' (Emphasis
added.)

"Under our statute, it is clear that water rights are
appurtenant to the land, and not to ownership of the land
which changes hands frequently. See ORS 540.510."

Wilber, 273 Or at 861-62 (additional emphasis added).

Wilber illustrates that, relevant to ORS chapter 537
and the appropriation procedures that preceded its enact-
ment, the longstanding rule in Oregon is that the ownership
of an appropriative right (e.g., a certificated water right) may
reside with a party that does not own the appurtenant land.
Put differently, a party's ownership of the appurtenant land
does not necessarily entail its ownership of the associated
certificated water right. In at least some situations, the own-
ership of a certificated water right will reside with one party
while the ownership of the appurtenant land resides with
another. Such is the circumstance in this case. Although
Ken-Wal enjoys the use of the water provided under certifi-
cates 8942 and 8943 by virtue of its ownership of a portion of
the appurtenant land, that ownership does not dictate that
Ken-Wal also owns the certificated water rights. Rather, for
the reasons described above, the statutory context compels

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the conclusion that the district acquired the legal ownership
interest in the certificated water rights when undertaking
the ORS chapter 537 procedures, and Ken-Wal enjoys the use
of the certificated water on its lands as a beneficiary in the
parties' trust relationship.

### IV. CONCLUSION

Because the text of ORS 540.510(1) and the
statutory context render the meaning of the phrase "holder of
any water use subject to transfer" unambiguous, our analysis
need not proceed further. The phrase "holder of [a] water use
subject to transfer" connotes a party with an ownership inter-
est. Construing the term "water use subject to transfer" in
this case as the right to use water established by certificates
8942 and 8943, we hold that the district is the "holder" of
those certificated water rights. The requisite ownership
interest in those rights vested in the district as trustee upon
issuance of the certificates. Ken-Wal's beneficial use has
enabled the district's ownership of the water rights through
an agency relationship. Ken-Wal's ownership of a portion of
the appurtenant land does not equate with ownership of the
certificated water rights. Ultimately, because we conclude
that Ken-Wal is not the "holder" of the water rights estab-
lished in certificates 8942 and 8943, Ken-Wal is not author-
ized under ORS 540.510(1) to change the associated points of
diversion without the district's consent.

The decision of the Court of Appeals is affirmed. The
order of the Water Resources Commission is reversed, and
the case is remanded to the commission for further proceed-
ings consistent with this opinion.