S056275, Opinion — Klamath Irrigation District v. United States

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On certified questions from the United States Court of Appeals for the Federal
Circuit; certification order dated July 16, 2008; certification accepted January 29,
argued and submitted May 13, 2009; certified questions answered March 11, 2010

KLAMATH IRRIGATION DISTRICT,
Tulelake Irrigation District,
Klamath Drainage District,
Poe Valley Improvement District,
Sunnyside Irrigation District,
Klamath Basin Improvement District,
Klamath Hills District Improvement Co.,
Midland District Improvement Co.,
Malin Irrigation District,
Enterprise Irrigation District,
Pine Grove Irrigation District,
Westside Improvement District No. 4,
Shasta View Irrigation District,
Van Brimmer Ditch Co.,
Fred A. Robison, Albert J. Robison,
Lonny E. Baley, Mark R. Trotman,
Baley Trotman Farms,
James L. Moore, Cheryl L. Moore,
Daniel G. Chin, Deloris D. Chin,
Wong Potatoes, Inc.,
Michael J. Byrne, Daniel W. Byrne,
and Byrne Brothers,
Plaintiffs,
v.
UNITED STATES OF AMERICA
and Pacific Coast Federation of Fishermen's Associations,
Defendants,
and
STATE OF OREGON,
by and through the
Oregon Water Resources Department,
Intervenor.
(Federal CC No. 2007-5115; SC S056275)
227 P3d 1145

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# En Banc

William M. Ganong, Klamath Falls, argued the cause for
plaintiffs Klamath Irrigation District, Tulelake Irrigation-
District, Klamath Drainage District, Poe Valley Improvement
District, Sunnyside Irrigation District, Klamath Basin
☒
Improvement District, Klamath Hills District Improvement
Co., Midland District Improvement Co., Malin Irrigation
District, Enterprise Irrigation District, Pine Grove Irrigation
District, Westside Improvement District No. 4, Shasta View
Irrigation District, Van Brimmer Ditch Co., Fred A. Robison,
Albert J. Robison, Lonny E. Baley, Mark R. Trotman, Baley
Trotman Farms, James L. Moore, Cheryl L. Moore, Daniel G.
Chin, Deloris D. Chin, Wong Potatoes, Inc., Michael J. Byrne,
Daniel W. Byrne, and Byrne Brothers. Michael H. Simon, of
Perkins Coie, Portland, filed the briefs for plaintiffs. With
him on the briefs were Julia E. Markley, Nicholle Y. Winters,
Nancie G. Marzulla, Roger J. Marzulla, and Paul S.
Simmons.

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David C. Shilton, United States Department of Justice,
Environment and Natural Resources Division, Washington,
D.C., filed the briefs and argued the cause for defendant
United States of America. With him on the briefs were John
C. Cruden, Acting Assistant Attorney General, Katherine J.
Barton, and Suzanne Bratis, Assistant United States
Attorneys.

Todd D. True, Earthjustice, Seattle, Washington, argued
the cause and filed the briefs for defendant Pacific Coast
Federation of Fishermen's Associations. With him on the
briefs was Stephanie M. Parent.

Stephanie L. Striffler, Senior Assistant Attorney
General, Salem, argued the cause and filed the briefs for
intervenor. With her on the briefs were John R. Kroger,
Attorney General, and Jerome Lidz, Solictor General.

Carl Ullman, Klamath Water Project, Chiloquin, filed the
brief for amicus curiae Klamath Tribes.

John T. Bagg, Salem, filed the brief for amicus curiae
Natural Resources Defense Council. With him on the brief
was John D. Escheverria.

KISTLER, J.

The certified questions are answered.

Walters, J., concurred and filed an opinion, in which
Balmer and Linder, JJ., joined.

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# Klamath Irrigation District v. United States ☒

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## KISTLER, J.

The United States Court of Appeals for the Federal
Circuit certified three questions to this court, which this
court accepted. Klamath Irrigation District v. United States,
345 Or 638, 202 P3d 159 (2009). All three questions arise out
of a dispute over water rights in the Klamath River basin.
Essentially, they ask whether, as a matter of state law, the
farmers and irrigation districts that use water from a federal
reclamation project have an equitable property interest in a
water right to which the United States holds legal title and
whether an equitable property interest in a water right is
subject to adjudication in the ongoing Klamath Basin water
rights adjudication. In answering those questions, we begin
by describing the procedural posture in which the questions
arise. We then discuss briefly the common law and statutory
context that preceded a 1905 state statute on which the par-
ties' arguments turn. Finally, we answer the certified
questions.

I

The Federal Bureau of Reclamation (the Bureau)
manages the Klamath Project, which stores and supplies
water to farmers, irrigation districts, and federal wildlife ref-
uges in the Klamath River basin. The plaintiffs in the under-
lying federal litigation are farmers and irrigation districts
that use water from the Klamath Project for irrigation and
other agricultural purposes. As a result of drought conditions
in 2001, the Bureau terminated the delivery of water to
plaintiffs that year in order to make water available for three
species of endangered fish.1

Claiming a property right in the water, plaintiffs
brought an action in the United States Court of Federal
Claims, alleging that the United States had taken their prop-
erty in violation of the Fifth Amendment and, alternatively,
that the United States had breached its contractual obliga-
tion to deliver water to them. The United States asked the
federal claims court to abstain from deciding plaintiffs' tak-
ings claim until an ongoing state water rights adjudication

1 The Bureau was able to make some water (approximately 70,000 acre feet)
available in July 2001.

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determined what, if any, property rights plaintiffs had in the
water from the Klamath Project. Cf. Colorado River Water
Conservation Dist. v. United States, 424 US 800, 819-20, 96
S Ct 1236, 47 L Ed 2d 483 (1976) (upholding a federal district
court ruling abstaining from deciding federal government
and tribal water rights that were at issue in a state water
rights adjudication).

In response to that argument, plaintiffs told the fed-
eral court that they were not asserting, in federal court, any
right to water that the state water rights adjudication would
determine. Plaintiffs took the position that the state water
rights adjudication would resolve who has the legal title to
use the water from the Klamath River basin but that it would
not resolve who has an equitable or beneficial property inter-
est in using the water. Plaintiffs accordingly assumed, for the
purposes of their federal takings claim, that the United
States holds legal title to the water rights, and they elected to
proceed in the federal action solely on the theory that they
hold an equitable or beneficial interest in the water rights,
which the government took when it refused to deliver water
to them in 2001. The Court of Federal Claims proceeded on
that theory, see Klamath Irrigation District v. United States,
67 Fed Cl 504, 513-14 (2005) (describing plaintiffs' position),
and so do we in answering the certified questions.2

Plaintiffs have argued in the federal action that
their equitable property interest in the water arose from two
sources: Section 8 of the Reclamation Act of 1902, ch 1093, 32
Stat 388, and state water law. The Court of Federal Claims
held that neither source of law gave plaintiffs an equitable
interest in the water from the Klamath Project. The court ini-
tially reasoned that federal law did not define the scope of
plaintiffs' water rights. 67 Fed Cl at 518-23.3 Turning to

2 We understand that some or all plaintiffs have asserted in the state water
rights adjudication that they hold legal title to the water right and are entitled to
have a certificated water right issued to them. In answering the certified questions,
we accept plaintiffs' claim as they have narrowed it in the federal proceeding; that
is, we assume that the United States holds legal title to the water and that plain-
tiffs claim only an equitable or beneficial interest in the water. We express no opin-
ion on plaintiffs' claims that they obtained and hold legal title to water from the
Klamath Project. We leave that question for the state water rights adjudication.

3 We do not describe the Court of Federal Claims' reasoning regarding plain-
tiffs' claims under section 8 of the Reclamation Act. That issue is beyond the scope
of the questions that the Federal Circuit has posed.

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plaintiffs' state law claims, the court held that, the United
States appropriated, pursuant to a 1905 Oregon statute, all
the then-unappropriated waters of the Klamath Basin and
that, under the terms of the 1905 statute, a person could not
obtain any property interest in that water without a formal
written release from the United States. Id. at 526-27.

At two points in its opinion, the Court of Federal
Claims summarized and quoted excerpts of various contracts
between the United States and plaintiffs concerning the dis-
tribution of water. Id. at 510-12, 527-30. The court later
explained that plaintiffs' contractual agreements with the
United States divided into five basic categories:

"(i) interests based upon an exchange agreement, in which
preexisting water rights were exchanged for an interest in
the Project water; (ii) interests deriving from district con-
tracts with the United States or the Bureau, claimed by the
districts; (iii) interests deriving from the district contracts
with the United States, claimed by individual irrigators as
alleged third-party beneficiaries; (iv) interests based upon
application for the beneficial use of water filed either by
homesteaders on reclaimed lands (Form A), or by home-
steaders or other landowners whose property does not
involve reclaimed lands (Form B), and the patent deeds
issued allegedly in response thereto; and (v) interests based
upon alleged water rights permits granted by the State
Oregon after the repeal of the 1905 Oregon legislation in
1953."

Id. at 530-31. The court concluded that agreements falling
into the first three categories resulted in contractual rights to
receive water and that a contractual interest is not a property
interest that gives rise to a takings claim under the Fifth
Amendment.4 Id. at 531-32. Regarding the fourth and fifth
categories, the court concluded that, because the patent
deeds and the water rights granted by the state had a later
priority date than the United States' water right, the United
States had not taken those rights when it denied water to
plaintiffs. Id. at 538-39.

4 It is not completely clear from the Court of Federal Claims' opinion why, in its
view, the agreements in the first three categories gave rise only to contractual
rights to receive water.

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Having reached those conclusions, the Court of
Federal Claims granted summary judgment for the United
States on plaintiffs' takings claim. Id. at 540. Later, in a sep-
arate opinion, that court granted summary judgment for the
United States on plaintiffs' contractual claim, reasoning that
the sovereign acts doctrine provided a complete defense to
that claim. Klamath Irrigation District v. United States, 75
Fed Cl 677, 695 (2007). Having disposed of both claims, the
court entered judgment in the United States' favor.

Plaintiffs appealed to the United States Court of
Appeals for the Federal Circuit. Regarding plaintiffs' takings
claim, the Federal Circuit observed that the "answer to
[plaintiffs'] takings question depends upon complex issues of
Oregon property law, including the interpretation of Oregon
General Laws, Chapter 228, § 2 (1905)." Klamath Irrigation
Dist. v. United States, 532 F3d 1376, 1377 (Fed Cir 2008). To
assist its resolution of plaintiffs' takings claim, the Federal
Circuit certified three state law questions to this court:

"1. Assuming that Klamath Basin water for the
Klamath Reclamation Project 'may be deemed to have been
appropriated by the United States' pursuant to Oregon
General Laws, Chapter 228, § 2 (1905), does that statute
preclude irrigation districts and landowners from acquiring
a beneficial or equitable property interest in the water right
acquired by the United States?

"2. In light of the statute, do the landowners who
receive water from the Klamath Basin Reclamation Project
and put the water to beneficial use have a beneficial or equi-
table property interest appurtenant to their land in the
water right acquired by the United States, and do the irri-
gation districts that receive water from the Klamath Basin
Reclamation Project have a beneficial or equitable property
interest in the water right acquired by the United States?

"3. With respect to surface water rights where appro-
priation was initiated under Oregon law prior to February 24,
1909, and where such rights are not within any previously
adjudicated area of the Klamath Basin, does Oregon State
law recognize any property interest, whether legal or equi-
table, in the use of Klamath Basin water that is not subject
to adjudication in the Klamath Basin Adjudication?"

Id. at 1377-78. As noted, we accepted the certified questions.

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# II

Before answering those questions, it is helpful to dis-
cuss briefly the common-law and statutory context for the
Oregon legislature's enactment of the 1905 statute. See
Stevens v. Czerniak, 336 Or 392, 401, 84 P3d 140 (2004)
(explaining that the context for interpreting a statute's text
includes "'the preexisting common law and the statutory
framework within which the law was enacted' " (quoting
Denton and Denton, 326 Or 236, 241, 951 P2d 693 (1998)).5
We begin with the Oregon common law regarding the appro-
priation of water rights. We then turn to the statutory back-
ground that both preceded the 1905 Oregon statute and
informs our understanding of it.

Before 1905, the Oregon courts had adopted the doc-
trine of prior appropriation of water rights. See Fort Vannoy
Irrigation v. Water Resources Comm., 345 Or 56, 64-67, 188
P3d 277 (2008) (describing the history of that doctrine in
Oregon). To encourage the beneficial use of water, Oregon
courts recognized before 1905 that a person who puts surface
water to beneficial use acquires a right to use that water that
takes precedence over subsequent users. See id. (same).
Before the Oregon legislature codified the doctrine of prior
appropriation in 1909, this court had held that a person seek-
ing to establish his or her right to use water had to prove
three elements:

"First, an intent to apply it to some beneficial use, existing
at the time or contemplated in the future; second, a diver-
sion from the natural channel by means of a ditch, canal, or
other structure; and third, an application of it, within a
reasonable time, to some useful industry."

Low v. Rizor, 25 Or 551, 557, 37 P 82 (1894).

Customarily, the intent to apply water to a beneficial
use was manifested by some form of public notice, and the
date of the appropriation related back to the date of the
notice, as long as the appropriator both began the diversion of
the water and put the water to beneficial use within a reason-
able time. Nevada Ditch Co. v. Bennett, 30 Or 59, 84-86, 45 P

5 Because no legislative history of the 1905 act remains, we are left with the
text and context of that statute to determine the legislature's intent.

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472 (1896); see Re Rights to Waters of Silvies River, 115 Or 27,
101-02, 237 P 322 (1925) (describing pre-1909-code methods
of providing notice). Put differently, although appropriation
was perfected " 'only when the ditches or canals [we]re com-
pleted, the water diverted from its natural stream or chan-
nel, and actually used for beneficial purposes,'" the priority
date for the water right related back to the date of the notice
as long as the diversion and beneficial use were accomplished
with reasonable diligence. Nevada Ditch, 30 Or at 90-91
(quoting Clesson S. Kinney, A Treatise on the Law of
Irrigation and Water Rights § 167 (1894)).

The scope and extent of the appropriation turned on
the appropriator's intent, typically manifested in the notice
and ultimately limited by the beneficial use to which the
water was put. See id. at 98-100 (explaining that the extent of
the appropriation with a priority date that related back to the
notice turned on the use set out in the notice and did not
include other or additional uses). The right to use water, once
appropriated, is appurtenant to the land and passes with it,
even without an express grant of water rights in the deed
conveying the land. Simmons v. Winters, 21 Or 35, 44, 27 P 7
(1891).

Initially, the court's decisions focused only on indi-
viduals who diverted water for use on property that they
owned, and the cases frequently turned on factual disputes,
such as the diligence with which the owner had constructed a
ditch to put the water to beneficial use. The application of
those common-law rules raised potentially more difficult
legal issues when a person diverted water for use on land
that he or she did not yet own and, in a separate situation,
when one person diverted water for another's use.

The first situation arose primarily as a result of fed-
eral acts, such as the Homestead Act of 1862, ch 79, 12 Stat
392, that promised a tract of federal land to persons who
entered onto public land and reclaimed it. Typically, those
acts required an initial application, an entry onto the land,
and proof that the settler had completed certain require-
ments within a period of years. E.g., id. § 2. Until the settler
completed those requirements, legal title to the land
remained in the United States.

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This court first considered what state property
rights, if any, a settler had in such land in Kitcherside v.
Myers, 10 Or 21 (1881). In that case, the court explained that
the disputed land "is public land of the United States, subject
to be taken under the acts of congress as homestead, and
which the plaintiff has taken the necessary preliminary steps
to secure as a homestead." Id. at 26. The defendant, however,
had occupied part of the plaintiff's tract, and both parties
claimed a right to possess the part of the tract that the defen-
dant occupied. Id. at 21-22. Recognizing that legal title to the
land lay in the United States (the plaintiff had not yet per-
fected his claim and received a patent from the government),
the court held that "[t]he right of possession of the plaintiff
for the purpose of homestead is a valuable right which equity
will protect." Id. at 26-27. Accordingly, it upheld the trial
court's decree giving the plaintiff the right of possession. Id.
at 27.

Later, the court held that, when a settler had put
water to beneficial use on such land, the water right was
appurtenant to the land and passed with it even though the
settler had not yet received legal title to the land. Hindman v.
Rizor, 21 Or 112, 117-18, 27 P 13 (1891). In Hindman, the
plaintiff's predecessors in interest entered onto federal land
in 1863, diverted water onto the land, and cultivated it, but
did not perfect their title to the land until 1882. Id. at 115.
The question in Hindman was whether the plaintiff's prede-
cessors in interest had obtained a water right before 1882
(the date that they perfected their title to the land) that they
could pass to the plaintiff.6

In answering that question, this court recognized
initially that "[a] settler upon public land has a [possessory]
right thereto as against every person except the government,
and when such settlement is made with the view of obtaining
title, such right is a valuable property right, which the courts
will protect and enforce." Id. at 116-17 (citing Kitcherside).

6 The question arose because, after 1863 but before 1882, another person had
put water to beneficial use on land that he owned and claimed that his appropria-
tion was prior to the plaintiff's, whose water rights he contended did not vest until
plaintiff's predecessor in interest perfected title to the land in 1882.

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The court also recognized that, "[w]hen such a settler appro-
priates water for the necessary irrigation of the land occupied
by him, it becomes as much a part of his improvements as his
buildings or fences, and can be sold and transferred with his
possessory right in the same way." Id. at 117. The court
explained that "[t]he water when appropriated and used for
irrigation becomes an incident to the land, and the transfer of
the possessory rights thereto carries with it the water unless
expressly reserved." Id. at 118. Accordingly, the court held
that the plaintiff's predecessors in interest had obtained a
water right before they obtained title to the property in 1882,
which could and did pass to the plaintiff.

The Oregon courts also considered, for the first time
in Nevada Ditch, whether one person could appropriate
water for another's use and, if that were possible, what rights
the user had in the water. The court explained that, in many
instances, individual landowners located at some distance
from streams lacked the resources, even when they acted col-
lectively, to construct ditches to divert water to irrigate their
lands. Id. at 96. It observed that, "[i]n such cases other per-
sons possessing capital are often willing to make the diver-
sion for the benefit of those who have use for the water * * *. "
Id. However, that arrangement raised fundamental ques-
tions, the foremost of which was whether one person could
appropriate water for another's use. And if that were possi-
ble, questions arose concerning the relationship between the
appropriator and the user, the priority date of the water
right, and whether the appropriator, the user, or both owned
the right.

The court answered two of those questions in
Nevada Ditch. It held initially that one person could appro-
priate water for another's use; that is, "the bona fide inten-
tion which is required of the appropriator to apply the water
to some useful purpose may comprehend a use to be made by
or through another person, and upon lands and possessions
other than those of the appropriator." Id. at 97. It also held
that, under Oregon law, the persons who used water that
another person had appropriated had the same priority date
(the date of the notice) as long as the later user put the water
to beneficial use within a reasonable time and the use came

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within the scope of the original plan set out in the appropri-
ator's notice. Id. at 98-102.7

The court noted but did not decide two aspects of the
relationship between the appropriator and the persons who
put the water to beneficial use. It noted initially that "it
would seem that he who designed the scheme and made the
diversion [the appropriator] was the principal, rather than
the user, who applies the result of the former's labor to his
beneficial purpose." Id. at 97-98.8 Having noted that that
"seem[ed]" to be the relationship, the court did not decide
whether that was the relationship. Rather, it observed that,
"in whatever capacity the parties to the appropriation may be
considered," both were necessary to appropriate the water.
Id. at 98. The court next raised the question of who, as
between the appropriator and the user, "would own the
appropriation when it is completed." Id. The court again
found it unnecessary to decide that issue but observed, in
dicta, that "[w]e are of the opinion * * * that it is the subject
of contract between the person who initiates the appropria-
tion and the user." Id. at 98. The court went on to note that,
in any event, both the appropriator and the user were neces-
sary to perfect and maintain an appropriation. Id.

Later Oregon decisions, issued after 1905, have
addressed the respective rights of appropriators and users of
a water right when one person appropriates water for

7 The court's holding in this regard is expressed in its resolution of the parties'
claims. Accordingly, we describe the relevant facts and the court's resolution of the
parties' claims briefly. On July 12, 1881, the principals of what became the Nevada
Ditch Co. posted a notice of their intent to divert 8,000 miners' inches of water from
the Malheur River for agricultural and milling purposes. Nevada Ditch, 30 Or at
64-65. The notice set out generally the route and terminals of the ditch. Id. at 65.
Other settlers came as late as 1886 and took subdivided interests in the ditch
according to the original plan. Id. at 69. Meanwhile, other persons appropriated
water from the Malheur River after 1881 but before the later settlers came in 1886
and began putting the water to beneficial use. Although those persons claimed a
prior right to the water than the later settlers claiming under Nevada Ditch's
appropriation, this court held that the priority date for the later settlers' water
rights related back to the date of the 1881 notice. Id. at 102. This court also held
that the priority date for subsequent extensions of the ditch, which went beyond
the original plan, did not relate back to the 1881 notice but had a separate priority
date. Id. at 100.

8 In making that observation, the court distinguished Oregon law from
Colorado law, which regarded the person who diverted the water as the agent for
the person who put it to beneficial use. Id. at 97.

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another's use. For instance, this court has explained that, in
"a mutual water company, not organized for the purpose of
selling water or as a profit corporation, but for the sole pur-
pose of transmitting and delivering to the appropriators and
owners of the water the quantity to which each is entitled,"
the corporation held legal title to the water right and acted as
the trustee for the users who have a beneficial property inter-
est in the water right. Eldredge v. Mill Ditch Co., 90 Or 590,
596, 177 P 939 (1919); see Smith v. Enterprise Irrigation
Dist., 160 Or 372, 378-79, 85 P2d 1021 (1939) (an irrigation
district held the water right in trust for the district's mem-
bers even though the statute creating that irrigation district
did not so provide). Later, the court explained that, when a
private for-profit corporation, acting pursuant to an 1891
Oregon statute, entered into annual rental agreements with
the persons using the water, the corporation, not the users,
owned the water right. In re Waters of Walla Walla River, 141
Or 492, 498, 16 P2d 939 (1933).

That was the state of the Oregon common law of
appropriation before 1905, with the later gloss placed on it by
Eldredge, Smith, and Walla Walla River. The common law
that preexisted the 1905 statute is, however, not the only con-
text for the 1905 statute. Both the state and the federal gov-
ernment passed various statutes before 1905 that inform our
understanding of the 1905 Oregon statute. Those statutes
share a similar purpose; they were intended, in one way or
another, to get water to the arid lands in Oregon (and the
west) so that those lands could be settled and reclaimed.
However, those acts differ in their details, and that difference
potentially has significance in understanding what the
Oregon legislature intended in 1905. Accordingly, we briefly
summarize the Oregon act of 1891 and the Oregon act of 1895
before turning to the federal legislation and Oregon's
response to it.

In 1891, Oregon passed a law giving private compa-
nies a franchise to construct ditches and provide water for
irrigation and related purposes to persons whose lands were
adjacent to or within reach of the ditches. Or Laws 1891, p 52,
§ 1. For the company's use of the water to come within the
terms of the 1891 act, the company had to supply the water to

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all persons, adjacent to or within reach of the ditches, "with-
out discrimination other than priority of contract, upon pay-
ment of charges therefor, as long as there may be water to
supply." Id.

The act required the private company to post a
notice and, within 10 days, to file a copy of the notice with the
county clerk identifying the point at which the head-gate
would be constructed, the general course and size of the
ditch, the number of cubic inches of water to be appropriated,
and the number of reservoirs, if any. Id. §§ 4-5. The act also
required the company to begin constructing the ditch within
six months and to "prosecute the [construction of the ditch]
without intermission [except for certain contingencies] until
the same be completed." Id. § 9. The act did not expressly
make the extent of the appropriation turn on the amount of
water put to beneficial use. Rather, it provided that "the
actual capacity of [the] ditch or canal or flume, when com-
pleted, shall determine the extent of the appropriation" and
that, upon compliance with the terms of the act, "the right to
the use of the water appropriated shall relate back to the date
of posting said notice." Id. Finally, the act provided that the
right to use the water, once appropriated, may be "lost by
abandonment" if the corporation constructing the ditch "shall
fail or neglect to use the same for the period of one year at any
time." Id. § 22.

This court did not have occasion before 1905 to inter-
pret the rights arising under that act, at least as they bear on
the issues in this case. In 1924, this court read the 1891 act in
light of the provisions of the 1909 statute setting out Oregon's
water code; it suggested that a beneficial use was necessary
to perfect an appropriation of water under the 1891 act and,
relying on dicta from Eldredge, that the persons who used the
water were the true owners of the water right. See Re Water
Rights of Hood River, 114 Or 112, 134-39, 227 P 1065 (1924)
(quoting dicta from Eldredge for the proposition that " 'even
in cases of public service corporations organized for profit and
selling water to the general public, * * * the water and ditch
rights really belong to the individual appropriator' ").

In 1933, this court held that the dicta in Eldredge
did not apply to corporations acting pursuant to the 1891 act.

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Walla Walla River, 141 Or at 498. The court concluded that,
when a public company complies with the provisions of the
1891 act, "it, and not the owner of the land supplied, acquires
the right to the use of the water." Id. at 497. It explained that
" '[t]he water is appurtenant to, but not inseparable from the
land,'" id. (quoting In re Waters of Deschutes River, 134 Or
623, 657, 286 P 563, 294 P 1049 (1930)), and that, when the
water users took their water under annual rental contracts,
"those rental contracts limited their rights to the extent of
water and time designated in the contract," 141 Or at 499.9

In 1895, the Oregon legislature took a different
approach. It authorized the formation of irrigation districts
that would acquire water rights and hold them in trust for
their members. Or Laws 1895, p 13; see Little Walla Walla
Irrigation Dist. v. Preston, 46 Or 5, 78 P 982 (1904) (describ-
ing the source and terms of the 1895 act). Specifically, the
1895 act authorized persons owning land susceptible to irri-
gation to petition for the creation of an irrigation district. Id.
§§ 1, 2. In addition to providing procedural protections for the
members of the district, the act authorized the board of direc-
tors of an irrigation district "to acquire, either by purchase or
condemnation (or other legal means), all lands and waters
and water rights, and other property necessary for the con-
struction, use, supply, maintenance, repair and improve-
ments of said canal or canals and works." Id. §§ 3, 12. Fur-
ther, it provided that "[t]he legal title to all property acquired
under the provisions of this act shall * * * vest in such irri-
gation district, and shall be held in trust for and is hereby
dedicated and set apart to the uses and purposes set forth in
this act." Id. § 13. The terms of the act thus provided that,
although the irrigation district would hold legal title to the
water that it appropriated, it would hold that title in trust for
its members. Cf. Fort Vannoy, 345 Or at 85-86 (construing
the modern counterpart to the 1895 act).

9 In Walla Walla River, one water company that had organized under the 1891
act appropriated water in 1903, which it supplied to water users pursuant to
annual rental contracts. 141 Or at 495. Later, those same users began to take
water from a second water company. Id. at 496. The second company contended
that, because the water was appurtenant to the land, the users (and it derivatively)
could claim an appropriation date of 1903, As explained above, this court disa-
greed, holding that the first company, not the users, held the entire water right.

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Oregon was not alone in seeking to bring water to
the arid west so that the land could be reclaimed and put to
beneficial use. The Supreme Court recounted the federal gov-
ernment's efforts in that regard in California v. United
States, 438 US 645, 656-63, 98 S Ct 2985, 57 L Ed 2d 1018
(1978). It explained that, after Congress passed the
Homestead Act of 1862, 12 Stat 392, to open up the public
domain generally, Congress "took its first step toward
encouraging the reclamation and settlement of the public
desert lands in the West" by passing the Desert Land Act of
1877. California, 438 US at 657. That act made 640 acres of
arid desert lands available to persons who, after filing a dec-
laration and paying 25 cents an acre, reclaimed the land "by
conducting water upon the same." Desert Land Act of 1877,
ch 107, 19 Stat 377.10

The persons who acquired public land pursuant to
the Homestead and Desert Land Acts typically "chose those
lands which were the nearest or most accessible to the
streams," leaving more remote and less accessible lands
uncultivated. Clesson S. Kinney, 3 A Treatise on the Law of
Irrigation and Water Rights § 1314 (2d ed 1912). Congress
sought to promote cultivation of those more remote lands by
enacting the Carey Act in 1894. Carey Act, ch 301, § 4, 28 Stat
422. That act authorized the Secretary of the Interior to
"donate, grant, and patent to [certain] State[s] * * * such
desert lands, not exceeding one million acres in each State, as
the State may cause to be irrigated, reclaimed, [and] occu-
pied." Id. The Carey Act left it to the states either to construct
themselves or to secure construction, through agreements
with private contractors, of the canals and irrigation works
necessary to reclaim the more remote tracts of desert land.
Kinney, 3 A Treatise on the Law of Irrigation and Water
Rights § 1323.11

10 The Desert Land Act is notable primarily because it confirmed that

"all non-navigable waters then a part of the [federal] public domain became
publici juris, subject to the plenary control of the designated states * * * the
right in each to determine for itself to what extent the rule of appropriation or
the common-law rule in respect of riparian rights should obtain."

California Oregon Power Co. v. Beaver Portland Cement Co., 295 US 142, 163-64,
55 S Ct 725, 79 L Ed 1356 (1935).

11 To take advantage of the Carey Act, Oregon passed a law in 1901 accepting
the conditions that Congress had placed on the grant of desert lands to the states.

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Private efforts at creating large-scale reclamation
works in the arid West did not prove profitable, and the
Carey Act did little to advance the reclamation of those lands
that Congress had sought to encourage. See 2 Water and
Water Rights, § 41.02 at 41-7 (3d ed 2009). In his message to
Congress on December 3, 1901, President Theodore Roosevelt
noted that problem. He told Congress that there "remain
vast areas of public land which can be made available
for homestead settlement, but only by reservoirs and main-
line canals, impracticable for private enterprise." Kinney, 3 A
Treatise on the Law of Irrigation and Water Rights § 1238 at
2239 (quoting President Theodore Roosevelt, Message to
Congress (Dec 3, 1901)). The President proposed that the
United States build the large-scale irrigation works neces-
sary for the federal government to achieve its object of "dis-
pos[ing] of the land to settlers who will build homes upon it."
Id.

Specifically, the President proposed that

"These irrigation works should be built by the Government
for actual settlers, and the cost of construction should, so
far as possible, be repaid by the land reclaimed. The distri-
bution of the water, the divisions of the streams among irri-
gators, should be left to the settlers themselves, in conform-
ity with the state laws, and without interference with those
laws or with vested rights. The policy of the National
Government should be to aid irrigation in the several
States and Territories in such a manner as will enable the
people in the local communities to help themselves, and as
will stimulate needed reforms in the State laws and regu-
lations governing irrigation."

Id. Within six months after President Roosevelt's speech to
Congress, the Congress passed and the President signed into
law the Reclamation Act of 1902. Id. at 2238.

Or Laws 1901, p 378, § 1. The Oregon legislature authorized the State Land Board
to enter into contracts with private companies to construct ditches, if the compa-
nies agreed to meet certain conditions. Id. §§ 2-5. The act also provided that "[t]he
right to the use of water for irrigation of any tract or subdivision of lands reclaimed
under the provisions of this act shall become and perpetually remain appurtenant
thereto," subject to annual maintenance charges and "proper and reasonable rules
and regulations adopted for the irrigation system under and by which the said land
has been reclaimed." Id. § 8.

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The Reclamation Act created a fund derived from
the proceeds of the sale of public lands to be used for the con-
struction of "irrigation works for the storage, diversion, and
development of waters for the reclamation of arid and semi-
arid lands in the [western states and territories]." The
Reclamation Act of 1902, ch 1093, 32 Stat 388 § 1. It author-
ized the Secretary of the Interior, upon determining that an
irrigation contract was practicable, to let contracts for the
construction of irrigation works and to give public notice of
the "lands irrigable under such project, [the] limit of area per
entry," and "the charges which shall be made per acre upon
the said entries, * * * and the number of annual installments,
not exceeding ten, in which such charges shall be paid." Id.
§ 4. The Act provided that the charges shall be determined
"with a view of returning to the reclamation fund the esti-
mated cost of construction of the project, and shall be appor-
tioned equitably." Id.

The Act provided that persons entering onto the land

"shall, in addition to compliance with the homestead laws,
reclaim at least one-half of the total irrigable area of his
entry for agricultural purposes, and before receiving patent
for the lands covered by his entry shall pay to the Government
the charges apportioned against such tract as provided
[above]."

Id. § 5. The Act also provided for the sale of water rights to
privately owned land within the reclamation project and
stated that "no such right shall permanently attach [to the
privately owned land] until all payments therefore be made."
Id. Finally, the Act provided that "a failure to make any two
[annual] payments when due shall render the entry subject
to cancellation, with the forfeiture of all rights under this
Act." Id.

The Act contemplated that, when the "major portion
of the lands irrigated from the waters of any works herein
provided for" has been paid, then the "management and oper-
ation of such irrigation works shall pass to the owners of the
lands irrigated thereby." Id. § 6. The Act specified, however,

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that "title to and the management and operation of the res-
ervoirs and the works necessary for their protection and oper-
ation shall remain in the Government until otherwise pro-
vided by Congress." Id. Finally, the Act reserved state control
over water rights with one proviso. Id. § 8. Specifically, sec-
tion 8 of the Act provided:

"That nothing in this Act shall be construed as affecting
or intending to affect or to in any way interfere with the
laws of any State or Territory relating to the control, appro-
priation, use, or distribution of water used in irrigation, or
any vested right acquired thereunder, and the Secretary of
the Interior, in carrying out the provisions of this Act, shall
proceed in conformity with such laws * * *: Provided, That
the right to the use of water acquired under the provisions
of this Act shall be appurtenant to the land irrigated, and
beneficial use shall be the basis, the measure, and the lim-
itation of the right."

The United States Supreme Court has explained
that, in enacting the Reclamation Act, Congress intended
that "the Secretary would have to appropriate, purchase, or
condemn necessary water rights in strict conformity with
state law." California, 438 US at 665. The Court also
explained that Congress intended that, "once the waters
were released from the Dam [or project], their distribution to
individual landowners would again be controlled by state
law." Id. at 667. The Court observed, however, that

"Congress did not intend to relinquish total control of the
actual distribution of the reclamation water to the States.
Congress provided in § 8 itself that the water right must be
appurtenant to the land irrigated and governed by benefi-
cial use, and in § 5 Congress forbade the sale of reclamation
water to tracts of land of more than 160 acres."

Id. at 668 n 21.12

In response to the Reclamation Act, the 1905 Oregon
legislature passed an act that, among other things, created a
procedure for the United States to appropriate water for the

12 Since 1902, Congress has amended the Reclamation Act on numerous occa-
sions. We describe the Reclamation Act as originally enacted because Congress had
not amended it substantively before the Oregon legislature enacted the 1905 stat-
ute that gives rise to the certified questions.

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irrigation works that the Reclamation Act authorized.
Oregon Laws 1905, chapter 228, section 2, of the 1905 act
provided:

"Whenever the proper officers of the United States, author-
ized by law to construct works for the utilization of water
within this State, shall file in the office of the State
Engineer a written notice that the United States intends to
utilize certain specified waters, the waters described in
such notice and unappropriated at the time of the filing
thereof shall not be subject to further appropriation under
the laws of this State, but shall be deemed to have been
appropriated by the United States; provided, that within a
period of three years from the date of filing such notice the
proper officer of the United States shall file final plans of
the proposed works in the office of the State Engineer for
his information; and provided further, that within four
years from the date of such notice the United States shall
authorize the construction of such proposed work. No
adverse claims to the use of the water required in connec-
tion with such plans shall be acquired under the laws of this
State except as for such amount of said waters described in
such notice as may be formally released in writing by an
officer of the United States thereunto duly authorized,
which release shall also be filed in the office of the State
Engineer."

The state act also authorized the state engineer to gather the
necessary data to determine any prior rights to use water
from a stream system on which the United States planned to
construct irrigation works; it authorized the Oregon Attorney
General to file a suit in state court, on the Secretary of the
Interior's request, to determine and declare those rights; and
it specified that any decree resulting from such a suit shall
"declare, as to the water right adjudged to each party
the extent, the priority, amount, purpose, place of use, and,
as to water used for irrigation, the specific tracts of land to
which it shall be appurtenant." Or Laws 1905, ch 228, §§ 3-5.

On February 28, 1905, a representative of the
United States posted a notice claiming "all the unappropri-
ated waters of the Klamath River." The notice stated that
"[t]he [w]ater is to be used for irrigation, domestic, power,
mechanical and other beneficial uses in and upon lands situ-
ated in Klamath Oregon and Modoc California counties." On

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May 17, 1905, the Bureau filed the following notice with the
state engineer:

"Notice is hereby given that the United States intends to
utilize * * * [a]ll of the waters of the Klamath Basin in
Oregon * * *.

"It is the intention of the United States to completely utilize
all the waters of the Klamath Basin in Oregon, and to this
end this notice includes all lakes, springs, streams,
marshes and all other available waters lying or flowing
therein.

"That the United States intends to use the above described
waters in the operation of works for the utilization of water
in the State of Oregon under the provisions of the act of
Congress approved June 17, 1902 (32 Stat, 388), known as
the Reclamation Act."

Klamath Irrigation Dist., 67 Fed Cl at 524 (quoting the notice
filed with the state engineer).13 With that background in
mind, we turn to the Federal Circuit's questions.

III

A

The Federal Circuit's first question asks:

"Assuming that Klamath Basin water for the Klamath
Reclamation Project 'may be deemed to have been appropri-
ated by the United States' pursuant to Oregon General
Laws, Chapter 228, § 2 (1905), does that statute preclude
irrigation districts and landowners from acquiring a bene-
ficial or equitable property interest in the water right
acquired by the United States?"

In answering that question, we assume that the United
States appropriated water rights pursuant to the 1905 stat-
ute14 and that it acquired and presently holds legal title to

13 The Court of Federal Claims noted that the United States also posted a
notice of appropriation for the Lost River system but did not set out the terms of
that notice. 67 Fed Cl at 524.

14 The parties disagree whether the United States appropriated the water
rights solely by complying with the three conditions specified in the 1905 statute or
whether the water also had to be put to beneficial use to perfect the appropriation.
The court's first question, however, asks us to assume that the United States
appropriated the water rights. The mechanism by which it accomplished that
appropriation may be important to answer whether, as the state contends, both the

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use the water for the purposes stated in its notice. The ques-
tion that the Federal Circuit has asked is: In providing that
the United States could appropriate water rights pursuant to
the 1905 statute, did the Oregon legislature intend to pre-
clude persons putting the water to beneficial use from acquir-
ing a beneficial or equitable property interest in the water
right? The answer to that question is "no."

The first sentence in section 2 of the 1905 statute
provides that, if the United States files a notice and meets
two other conditions, all the unappropriated waters
described in the notice "shall not be subject to further appro-
priation under the laws of this State, but shall be deemed to
have been appropriated by the United States." Or Laws 1905,
ch 228, § 2. The quoted phrase provides two potential
grounds for concluding that the legislature intended to pre-
clude plaintiffs from acquiring an equitable right. First, sec-
tion 2 provides that the water described in the United States'
notice is not subject to further appropriation. Plaintiffs, how-
ever, are not seeking to appropriate the water right that the
United States holds. Rather, they contend in this proceeding
only that, because the United States holds the water right in
trust for them, they have a derivative interest in that right.

Second, section 2 designates the United States as
the "appropriator" of the water right. Potentially, designat-
ing the United States as the "appropriator" of a water right
could express an intent to preclude others from acquiring an
equitable property interest in that right. Because appropria-
tion was a term of art, we look to the way that the Oregon
courts and legislature had used that term before 1905 in
order to understand the significance of that designation. As
noted, this court had held in Nevada Ditch that one person
may appropriate water for another's use and that a later user
who puts the water to beneficial use within a reasonable
period of time pursuant to the appropriator's original plan
takes the same priority date as the appropriator. As also
noted, this court declined to decide in Nevada Ditch, as
between the appropriator and the user, who owned the

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water right. It follows from Nevada Ditch that, in designating
the United States as the appropriator of the water right, the
legislature did not necessarily intend to signify that either
the United States or the users owned the water rights.
Rather, under Nevada Ditch, the meaning of that term was
open at the time that the 1905 legislature used it. At a mini-
mum, we find nothing in the legislature's use of that term
that expresses an intent to preclude landowners and irriga-
tion districts from acquiring a beneficial or equitable prop-
erty interest in water rights that the United States has
appropriated.

The different ways in which the 1891 and 1895
Oregon statutes describe the relationship between an appro-
priator and a user reinforce that conclusion. Under the 1895
statute, an irrigation district acquires and holds legal title to
a water right but it holds that right in trust for the district's
members who put the water to beneficial use. Or Laws 1885,
p 13. Under the 1891 statute, at least as this court later inter-
preted it, a for-profit company that enters into annual rental
agreements with its users owns the entire water right. See
Walla Walla River, 141 Or at 498. And the 1901 statute
implementing the Carey Act provided that "[t]he right to the
use of water for irrigation of any tract or subdivision of lands
reclaimed under the provisions of this act shall become and
perpetually remain appurtenant thereto." Or Laws 1901,
p 382, § 8. Given the various ways in which an appropriator
can hold, share, or relinquish a property interest in the water
it appropriates, we cannot say that, merely by providing that
the United States may appropriate water rights pursuant to
the 1905 act, the Oregon legislature intended to preclude
landowners and irrigation districts from obtaining a benefi-
cial or equitable property interest in water that the United
States has appropriated.

A final contextual source bears on the issue. The
Oregon legislature enacted the 1905 statute in response to
Congress' passage of the Reclamation Act. It follows that the
Reclamation Act, as originally passed, sheds light on the
terms on which the Oregon legislature understood that the
United States would hold the water right that the 1905 act
authorized the United States to appropriate.15 As noted, the

15 The Federal Circuit's questions ask us to interpret state law. We cannot,
however, interpret the meaning of the 1905 Oregon statute without considering the

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Reclamation Act authorized the construction of federal irri-
gation works "for the storage, diversion, and development of
waters for the reclamation of arid and semi-arid lands" in the
Western states and territories. 32 Stat 388 § 1. Congress
wanted to make water available to settlers who entered onto
public land, and it provided for the issuance of patents for the
land if, within a specified period of time, the settlers entering
the land reclaimed "at least one-half of the total irrigable
area of his [or her] entry for agricultural purposes" and paid
within 10 years a proportionate share of the projected cost of
the irrigation works. Id. § 5. Congress also provided for sale of
water to privately owned land within the scope of the project,
provided that the tracts did not exceed 160 acres and that the
landowners repaid the proportionate share of the cost of con-
structing the irrigation works. Id.

In passing the Reclamation Act, Congress sought to
make water rights available for the benefit of those persons
who would use the water to reclaim the land. See Ickes v. Fox,
300 US 82, 95, 57 S Ct 412, 81 L Ed 525 (1937) ("Appropria-
tion was made not for the use of the government, but, under
the Reclamation Act, for the use of the land owners * * *. ").
Reading the 1905 Oregon statute in light of the Reclamation
Act that the Oregon legislature sought to facilitate, we con-
clude that, in authorizing the United States to appropriate
water for the construction of irrigation works, the Oregon leg-
islature did not intend to give the United States carte
blanche to use the water rights it appropriated in whatever
way it chose. Rather, the Oregon legislature authorized the
United States to appropriate state water rights pursuant
to the 1905 act for the benefit of those persons who the
Reclamation Act contemplated would put water to beneficial
use. That context is directly at odds with the notion that, in
providing for the United States to appropriate water rights,
the legislature intended to preclude landowners and irriga-
tion districts from acquiring a beneficial or equitable prop-
erty interest in the water right.16

terms and purposes of the Reclamation Act that the Oregon statute was intended
to facilitate.

16 Plaintiffs ask us to resolve a related but separate question; they ask us to
decide whether the water right that the United States appropriated is limited to
the uses specified in the notice that it filed in 1905. The scope of the right that the
United States appropriated is separate from the question whether plaintiffs have
an equitable property interest in that right (whatever its scope). As we understand

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The United States advances two reasons for reach-
ing a different conclusion. First, it relies on In re Waters of
Umatilla River, 88 Or 376, 168 P 922, 172 P 97 (1918). In that
case, the Western Land and Irrigation Company's predeces-
sor in interest had appropriated water pursuant to the 1891
Oregon statute at three points in time: in 1891, 1903, and
1907. Id. at 381-85. The initial question in that case was
whether Western's predecessor in interest had abandoned
the water that it appropriated in 1891. Id. at 381-82. This
court held that it had. Id. at 382-83. The court then noted
that the United States had appropriated water pursuant to
the 1905 Oregon act. Id. at 384-85. It observed that the
United States' compliance with the procedures set out in that
statute "vested the United States with title" to the water
specified in its notice and that the water rights that the
United States held had a priority date of September 6, 1905.
Id. at 385. It followed, the court held, that Western's 1903
appropriation took priority over the United States' 1905
appropriation, which in turn took priority over Western's
1907 appropriation. Id. at 385-86.

The decision in Umatilla River does not advance the
United States' position that the Oregon legislature intended
to preclude landowners and irrigation districts from acquir-
ing a beneficial or equitable property interest in water rights
that the United States appropriated. In determining the pri-
ority of the United States' water right in Umatilla River, the
court neither considered nor addressed the relationship
between the United States and the landowners who took
water under that appropriation. Rather, the question before
the court was the relative priority of competing appropriators
(Western's predecessor in interest and the United States).
Umatilla River has no bearing on our answer to the Federal
Circuit's first question.

The United States also relies on the second sentence
of section 2 of the 1905 act, which states:

the Federal Circuit's questions, they ask us to address the latter question, not the
former. The scope of the water right that the United States appropriated in 1905 is
a question for the state water rights adjudication, as well as the question of who
holds legal title to that right. We express no opinion on those questions.

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"No adverse claims to the use of the water required in
connection with such plans shall be acquired under the
laws of this State except as for such amount of said waters
described in such notice as may be formally released in
writing by an officer of the United States thereunto duly
authorized * * *. "

Or Laws 1905, ch 228, § 2. The United States reasons that
this sentence "spell[s] out the situations where 'other parties'
may obtain rights to waters identified by the United States in
its notice." In the United States' view, plaintiffs' present liti-
gation position demonstrates that their interests are adverse
to the United States. It follows, the United States concludes,
that, without a formal written release, plaintiffs have no
claim to any beneficial or equitable property interest in the
water that the United States appropriated pursuant to the
1905 statute.

The United States' argument rests on the assump-
tion that, when the Oregon legislature enacted the 1905 stat-
ute, it would have understood that the landowners and irri-
gation districts that took water under the United States'
appropriation would have an "adverse claim" to the water.
That is not how that phrase was commonly used. As this
court used those terms before 1905 in water rights disputes,
"adverse claim" referred to one of two situations. The court
used those terms to refer to a claim brought by a person who
contended that he or she had a right to use water by adverse
possession. See, e.g., Beers v. Sharpe, 44 Or 386, 394, 75 P 717
(1904); Mattis v. Hosmer, 37 Or 523, 532, 62 P 17, 62 P 632
(1900); Bowman v. Bowman, 35 Or 279, 283, 57 P 546 (1899);
Huston v. Bybee, 17 Or 140, 147-48, 20 P 51 (1888) (all illus-
trating proposition). The court also used those terms to refer
to a claim brought by another appropriator who contended
that his or her water right had an earlier priority date. See,
e.g., Brown v. Baker, 39 Or 66, 69, 65 P 799, 66 P 193 (1901);
Oviatt v. Big Four Mining Co., 39 Or 118, 126, 65 P 811
(1901); Carson v. Gentner, 33 Or 512, 518, 42 P 506 (1898)
(illustrating that usage).

Conversely, the court had not described the relation-
ship between an appropriator and those persons who took
water under that appropriation as either "adverse" or as a
"claim." See Nevada Ditch, 30 Or at 98. Rather, the court had

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described the relationship as one of mutual cooperation. Id. It
held out the possibility that the user was the agent for the
appropriator, but found it unnecessary to decide that point
because the parties' mutual efforts were necessary to effec-
tuate a perfected appropriation under the common law. Id.
We need not decide whether the legislature used the phrase
"adverse claim" in the 1905 statute to refer to an adverse pos-
session claim or the claim of an adverse appropriator to con-
clude that the 1905 legislature did not use that phrase as the
United States contends-to refer to the United States' rela-
tionship with the persons who took water under its appropri-
ation. In sum, we find nothing in the text and context of the
1905 statute that would preclude plaintiffs from acquiring a
beneficial or equitable property interest in the water right
appropriated by the United States.

B

The Federal Circuit's second question asks:

"In light of the [1905] statute, do the landowners who
receive water from the Klamath Basin Reclamation Project
and put the water to beneficial use have a beneficial or equi-
table property interest appurtenant to their land in the
water right acquired by the United States, and do the irri-
gation districts that receive water from the Klamath Basin
Reclamation Project have a beneficial or equitable property
interest in the water right acquired by the United States?"

As we understand the second question, it asks whether ben-
eficial use alone is sufficient to acquire a beneficial or equi-
table property interest in a water right to which another per-
son holds legal title. The answer to that question, as we have
restated it, is "no." Beneficial use is a necessary but not a suf-
ficient condition to acquire a beneficial or equitable property
interest in a water right. In explaining our answer, we first
address an assumption that underlies the court's question-
whether, under Oregon law, one person can hold a beneficial
or equitable property interest in a water right to which
another person holds legal title. We then explain why bene-
ficial use alone is not sufficient. Finally, we explain what, as
a matter of Oregon law, is required to establish a beneficial or
equitable property interest in a water right.17

17 In answering the Federal Circuit's second question, we address only whether
plaintiffs acquired a beneficial or equitable property interest under state law. The

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Oregon has recognized since 1862 that one person
may hold legal title to property and that another person may
hold equitable title to that property. See Smith v. Ingles, 2 Or
43, 44-45 (1862) (when defendant caused property to be con-
veyed to his sons for defendant's use and benefit, the sons
held legal title to the property and defendant held equitable
title). That rule applies equally to water rights. Eldredge, 90
Or at 594 (recognizing that one person could hold legal title to
a water right while another holds equitable title). As this
court explained in Fort Vannoy, "[t]he existence of [a] trust
relationship [between an irrigation district and its members]
bifurcates the ownership interest in each certificated water
right." 345 Or at 86. "The district holds legal title to the water
right as trustee, and the members hold equitable title as the
beneficiaries." Id .; see also id. at 87 (referring to an irrigation
district member's "equitable ownership interest" in the water
right).18

In Oregon, equitable property interests in water
rights have not derived solely from formal trust agreements.
For instance, this court recognized that beneficial users who
transferred appropriated water rights to a corporation and
took shares in the corporation in return held an equitable
ownership interest in the water right. Silvies River, 115 Or at
102-03. In reaching that conclusion, the court explained that
the corporation was formed "for the purpose of enabling the
various owners of land to have a system that would serve all
of them"; that is, even though the corporation held legal title
to the water right, it held the water right for the use and ben-
efit of its members. Id. at 98-99. That was sufficient for the
court to conclude that the shareholders held an equitable
property interest in the water right.19 As the court explained,

question whether that state property interest, if acquired, gives rise to a federal
takings claim is a matter of federal law that goes beyond the scope of the court's
questions, and we do not address it.

18 In Fort Vannoy, a statute provided that the irrigation district held the water
right in trust for its members. See 345 Or at 85 (citing ORS 545.239). The court
held, however, that the common law established that, as a consequence of that
trust relationship, the district had legal title to the right while the members held
equitable title. See id. at 86 (looking to common law to determine the effect of the
trust relationship).

19 The specific issue in Silvies River was whether the priority date for the
corporation's water right related back to a notice of appropriation signed by the

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"[a] court of equity will look beyond the form of the proceeding
and if possible consider the substance of the right." Id. at 103.

This court has reached the same conclusion without
regard to whether the shareholders in a corporation appro-
priated a water right and transferred that right to the corpo-
ration or whether the corporation appropriated the water
right and held it for the use and benefit of its shareholders.
See In re Water Rights of Willow Creek, 119 Or 155, 195, 199,
236 P 487, 237 P 682 (1925) (corporation held appropriated
water right in trust for the benefit of its shareholders who put
the water to beneficial use); Eldredge, 90 Or at 596 (explain-
ing that a mutual water company organized for the purpose
of transmitting and delivering water appropriated by its
shareholders held the water right as a trustee for the use and
benefit of its shareholders). That is, even though the share-
holders owned the stock and the corporation owned the water
right, the court, sitting in equity, "look[ed] beyond" that for-
mal arrangement and, considering its substance, ruled that
the persons who put the water to beneficial use held an equi-
table property interest in the water right.

We draw two conclusions from those cases. First, the
premise of the Federal Circuit's question is well-founded.
Oregon has recognized and continues to recognize that per-
sons who put water to beneficial use can acquire an equitable
or beneficial property interest in a water right to which some-
one else holds legal title. Second, in determining when such
an equitable property interest in a water right exists, this
court looks beyond form and focuses on substance. The court
has sought to determine from the structure of a particular
relationship and the agreements among the parties to that
relationship whether the party that holds legal title to the
right does so for the use and benefit of the persons who put
the water to beneficial use.

2

With that background in mind, we return to the
Federal Circuit's second question: Is beneficial use alone suf-
ficient to create a beneficial or equitable property interest in

shareholders but not the corporation. 115 Or at 98-99. The court concluded that,
because the corporation held the right for the use and benefit of its members, the
signatures of the shareholders were sufficient. Id. at 102,

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a water right to which another person holds legal title? We
answered that question "no" because this court has held that
beneficial use of water does not always give the user a prop-
erty interest in a water right that another person appropri-
ated. Walla Walla River, 141 Or at 497-98. It follows that we
cannot say, without qualification, that beneficial use alone is
sufficient under Oregon law to obtain an equitable property
interest in a water right. Two other factors bear on the
analysis. As discussed above, in deciding the respective prop-
erty interests of the appropriator and the user of a water
right, this court has looked not only to beneficial use but also
to the relationship between the parties, as well as any con-
tractual agreements between them. See id. at 497-98 (looking
to the nature of the relationship and the contractual agree-
ments); Silvies River, 115 Or at 98-102 (looking at the nature
of the relationship); Eldredge, 90 Or at 596 (looking to the
nature of the relationship); Nevada Ditch, 30 Or at 98 (hold-
ing out the possibility that contractual agreements matter).

The United States Supreme Court considered simi-
lar factors in deciding that, even though the United States
held legal title to the water right for the Newlands Project (a
Reclamation Act project in Nevada), the landowners who had
put the water to beneficial use held a beneficial or equitable
property interest in the water right. Nevada v. United States,
463 US 110, 122-26 and n 9, 103 S Ct 2906, 77 L Ed 2d 509
(1983). In that case, landowners had settled on land within
the Newlands Project and had entered into contractual
agreements with the United States for water. Id. at 126 n 9.
The Court explained that five different forms of contracts had
been used since the creation of the Newlands Project. Id.
"Two of the forms provide[d] for an exchange of a vested
water right by the landowner in return for the right to use
Project water." Id. The other three forms of contracts pro-
vided a water right in an amount that may be beneficially
applied to a specified tract of land. Id. The Court noted that,
of the three latter forms, the one most commonly used was an
application for a permanent water right for the irrigation of
the settler's land. Id.

In 1913, the United States filed suit in federal dis-
trict court, the Orr Ditch suit, to adjudicate the water rights
to the Truckee River for the benefit of the Pyramid Lake

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Indian Reservation and the Newlands Project. Id. at 113.
Neither the landowners nor the tribe appeared in that suit.
Id. at 121. As a result of that suit, the United States acquired
title to the water right for both reclamation and reservation
use in 1944.

In 1973, the United States sought to reallocate the
water decreed to it. Id. at 121. More specifically, the United
States sought to divert water that it had acquired for recla-
mation use to another federal use and argued that, because it
owned the water right, it was free to do so. Id. The Court
reached a different conclusion. It explained that, even though
the United States held legal title to the water right, it held
the water right in trust for the landowners. As the Court
explained,

"Once these lands were acquired by settlers in the Project,
the Government's 'ownership' of the water rights was at
most nominal; the beneficial interest in the rights con-
firmed to the Government resided in the owners of the land
within the Project to which these water rights became
appurtenant upon the application of Project water to the
land."

Id. at 126; see also id. at 127 (explaining that the United
States, in arguing that it could reallocate the water to a dif-
ferent use, had overlooked "the obligations that necessarily
devolve upon it from having mere title to water rights for the
Newlands Project, when the beneficial ownership of these
water rights resides elsewhere").

In determining that the landowners had an equita-
ble or beneficial property interest in the water right to which
the United States held legal title, the Court considered three
factors: (1) under state law, the water right became appurte-
nant to the land once it was put to beneficial use;20 (2) the
United States' relationship with the landowners under the
Reclamation Act; and (3) the contracts between the United

20 The Court explained that, under Nevada law, beneficial use was necessary to
perfect appropriation and that the right became appurtenant to the land on which
it was used. 463 US at 126. As discussed above, the Federal Circuit's questions
assume that the United States appropriated the water right, and we need not
decide, in answering the court's questions, whether, under Oregon law, beneficial
use was necessary to perfect the United States' appropriation of water rights under
the 1905 act. See note 14 above (reserving that issue).

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States and the landowners. Id. at 121-26 and n 9. The Court's
reasoning in Nevada does not bind us in deciding, as a matter
of state law, whether one party holds a water right in trust
for another. However, we find its analysis both persuasive
and consistent with Oregon law. We turn to a consideration
of those factors.

3

The first factor is whether the water right was
appurtenant to the land. Under Oregon law, the water right
became appurtenant to the land once the persons taking the
water from the Klamath Project applied it to their land and
put it to beneficial use. That is true even if those persons had
not yet perfected title to the land. As the court explained in
Hindman, settlers who entered onto public land (but who had
not yet perfected title to the land) acquired "a valuable prop-
erty right [in the land] which the courts will protect and
enforce," and the water they put to beneficial use became
appurtenant to the land. 21 Or at 116-17. The court was care-
ful to note in Hindman that, until the settlers perfected title
to the land, the possessory right in the land that the settler
acquired was valid against every person except the govern-
ment. Id. at 117. That reservation, however, merely recog-
nized that, if the United States cancelled the entry because
the settler failed to comply with its terms, the settler could
lose his or her right to the land and, along with it, the appur-
tenant water right. This court did not suggest that the settler
lacked a valuable property right in the water that the state
courts would not recognize and protect.21

The second factor requires us to determine the rela-
tionship that exists between the federal government and
plaintiffs. In the United States' view, it stands in the same
relationship to the water users as the private for-profit
company did in Walla Walla River; that is, the United States

21 Hindman discusses publicly held land that a settler reclaims and acquires.
Section 5 of the Reclamation Act also addresses privately held land. It provides
that "no such right [a right to the use of water] shall permanently attach [to the pri-
vately held land] until all payments therefore are made." 32 Stat 389, § 5. Section 5
thus recognizes that, even though water put to beneficial use on privately owned
land will become appurtenant to the land, the right does not attach permanently
until the landowner pays his or her proportionate share of the cost of constructing
the irrigation works.

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contends that it owns the entire water right and that plain-
tiffs have only a contractual right to receive the water. Plain-
tiffs and the State of Oregon argue that, although the United
States holds title to the water right, it does so for the use and
benefit of the landowners who put the water right to benefi-
cial use. In their view, the relationship between the United
States and plaintiffs is closer to that of the corporation and its
shareholders in Silvies River or Eldredge.

Neither party's analogy is perfect. The United States
is not a corporate entity (either a for-profit corporation as in
Walla Walla River or a mutual water company as in
Eldredge), and plaintiffs are not its shareholders. However,
the Court's decision in Nevada v. United States persuades us
that the United States holds the water right that it appropri-
ated pursuant to the 1905 Oregon act for the use and benefit
of the landowners. In explaining that the United States held
the water right it acquired in the Orr Ditch suit in trust for
the landowners in the Newlands Project, the Court explained
that "the primary purpose of the Government in bringing the
Orr Ditch suit in 1913 [and obtaining title to the water rights
in the decree] was to secure water rights for the irrigation of
land that would be contained in the Newlands Project, and
that [in doing so] the Government was acting under the aegis
of the Reclamation Act of 1902." 463 US at 121. In support of
that statement, the Court noted that, in filing the Orr Ditch
suit, the United States had alleged that the "litigation was
designed to quiet title to the Government's right to the
amount of water necessary to irrigate the lands set aside for
the [Newlands] Project," and that the decree entered in that
suit gave the United States title to the water " 'for the irri-
gation of 232,800 acres of land on the Newlands Project, for
storage in the Lahontan Reservoir, for generating power, for
supplying the inhabitants of cities and towns on the project
and for domestic and other purposes.' " Id. at 121 n 8 (quoting
decree).

That persuaded the Court that, in obtaining title to
the water under the aegis of the Reclamation Act, the United
States was not acting for its own benefit but for the benefit of
the persons who put the water to beneficial use reclaiming
the land. As the Court explained in Ickes, 300 US at 95, and
reiterated in Nevada, 463 US at 123, "[a]ppropriation was

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made not for the use of the government, but, under the
Reclamation Act, for the use of the land owners." The same
conclusion applies equally here. In appropriating water pur-
suant to the 1905 Oregon act, the United States was acting
under the aegis of the Reclamation Act, and the notices that
it filed in Oregon stated that it was appropriating the water
for virtually the same uses that the United States stated that
it was acquiring title to the water in Nevada. In appropriating
water under the 1905 act and pursuant to the Reclamation
Act, the United States was not acting as a for-profit company,
as in Walla Walla River, but was instead appropriating water
for the use and benefit of landowners who would put it to ben-
eficial use reclaiming the land.22

The United States argues that Nevada, Ickes, and a
third case, Nebraska v. Wyoming, 325 US 589, 65 S Ct 1332,
89 L Ed 1815 (1945), are all distinguishable on their facts. We
agree that Ickes and Nebraska are distinguishable, at least as
the parties have presented this case to us. In both those
cases, the Court concluded that the landowners had acquired
title to the water.23 In this case, by contrast, the parties have
assumed that the United States holds the title to the water
right. Nevada, on the other hand, is far closer to this case. In
Nevada, the United States held title to the water right as a
result of the Orr Ditch suit, and we assume that the United
States holds title to the right here. But, regardless of whether
distinctions could be drawn between Nevada and this case,
we think that the United States' argument misses the larger
point. In that case, as well as in Ickes and Nebraska, the

22 To be sure, Congress required persons taking water from a reclamation pro-
ject to repay a proportionate share of the costs of constructing the irrigation works.
But the same was true in both Ickes and Nevada. The payments were not intended
for the United States to turn a profit but to make the reclamation program self-
funding.

23 In Ickes, the landowners had entered into contracts with the Secretary of the
Interior to acquire water rights from a reclamation project by repaying the propor-
tionate share of the project's cost in ten annual installments. 300 US at 89-90. The
Court explained that the landowners "had made all stipulated payments and com-
plied with all obligations by which they were bound to the government, and * * *
had acquired a vested right to the perpetual use of the waters as appurtenant to
their lands." Id. at 94. In Nebraska, the landowners applied for and received state
water rights certificates as a result of putting the water to beneficial use on their
land. 325 US at 613. In both cases, the court concluded that the landowners
acquired the water right.

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Court recognized that, in acquiring water rights under the
aegis of the Reclamation Act, the United States was not act-
ing for its own benefit, but for the benefit of those persons
who Congress intended would put the water to beneficial use
reclaiming the land. That consistent recognition of the rela-
tionship created by the Reclamation Act persuades us that,
as a matter of state law, the relationship between the United
States and plaintiffs is similar to that of a trustee and
beneficiary.

The third factor is the contractual agreements
between the United States and plaintiffs. That factor bears
on the second. Even though we have concluded that, in appro-
priating the right to use the waters in the Klamath Basin, the
United States did so for the benefit of the landowners, the
United States and plaintiffs remained free within statutory
and constitutional limits to enter into agreements that clari-
fied, redefined, or even altered that relationship. Whether
they did so requires a full consideration of the agreements
between plaintiffs and the United States. On that point, it
appears that various plaintiffs have entered into different
forms of agreement with the United States and that those
agreements have been renegotiated, perhaps more than once,
since the Klamath Project began.

In attempting to assess the effect of the parties'
agreements on the relationship between them, we face a sig-
nificant difficulty. All the agreements between the United
States and plaintiffs in the present litigation do not appear to
be before us.24 The Court of Federal Claims summarized the
types of agreements that the parties entered into, and it
quoted portions of those agreements. However, we hesitate to
rely on that summary of the parties' agreements when, in
assessing the effect of those agreements on the state law
issue that the second certified question presents, we might
view other aspects of the agreements or their significance
under state law differently. We also note that the Court of

24 Plaintiffs included four agreements in their excerpts of record and the record
discloses other agreements. Not only does it appear from the Court of Federal
Claims decision that many other agreements exist, but the parties have not briefed
either the history or the significance of those different agreements in any detail.

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Federal Claims' assessment of the significance of the agree-
ments may rest on a misperception of state law. The Court of
Federal Claims explained that, under the 1905 Oregon act,
plaintiffs could obtain a property interest in the water right
that the United States appropriated only if the United States
executed a formal written release of that interest, and it con-
cluded that none of those agreements was sufficient to give
plaintiffs anything other than a contractual right to receive
water. As explained above, however, that understanding of
the 1905 Oregon law is not correct.

We are aware that the agreements that the Court of
Federal Claims described in its decision are similar to the
two forms of agreement that the Court concluded in Nevada
supported its determination that the United States held title
to the water rights in that case in trust for the landowners.
However, without all the agreements before us and without
briefing on them, we are in no position to provide a definitive
answer whether, as a matter of state law, the various con-
tractual agreements between the United States and plain-
tiffs support or defeat plaintiffs' claim that they have an equi-
table or beneficial property interest in the water right that
the United States appropriated pursuant to the 1905 act.

For instance, we cannot foreclose the possibility that
plaintiffs could have bargained away any equitable or legal
right to the water in return for a reduced payment schedule
or forgiveness of their debt. Conversely, the United States
may have granted plaintiffs either patents, water rights, or
contractual rights that would be sufficient, as a matter of
state law, for plaintiffs to have acquired at a minimum an
equitable property interest in the water.25 In sum, whatever
conclusion we might draw on the basis of the first two factors

25 We also note that some of the agreements that the Court of Federal Claims
mentioned, coupled with the fact that the parties have stipulated that plaintiffs
have paid all the costs of irrigation works, suggest that plaintiffs may themselves
hold a vested water right. See Ickes, 300 US at 94 (explaining that the landowners
in that case had acquired a vested water right by paying their proportionate share
of the irrigation project's construction costs and complying with their other con-
tractual obligations). We express no opinion on that point but mention it only to
note that the procedural posture in which this case arises poses additional difficul-
ties in answering the court's second question; that is, it is difficult to discuss in the
abstract whether plaintiffs have an equitable interest in the water right in light of
facts that suggest that some or all of them may have a greater property interest.

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noted above and whatever conclusion the Court of Federal
Claims' summary of the various agreements might suggest,
we lack a sufficient basis to provide a definitive answer to the
court's second question.

C

The Federal Circuit's third question asks:

"With respect to surface water rights where appropriation
was initiated under Oregon law prior to February 24, 1909,
and where such rights are not within any previously adju-
dicated area of the Klamath Basin, does Oregon State law
recognize any property interest, whether legal or equitable,
in the use of the Klamath Basin water that is not subject to
adjudication in the Klamath Basin Adjudication?"

The answer to the Federal Circuit's third question is "yes." A
person asserting only a beneficial or equitable property inter-
est in a water right is not a "claimant" who must appear in
the Klamath Basin adjudication and file a claim to determine
that interest. Conversely, a person who claims legal title to a
water right must file a claim in the adjudication or lose the
right.26

In answering the court's third question, we begin
with the text of ORS 539.210, which governs adjudication of
pre-1909 water rights. That statute provides in part:

"Whenever proceedings are instituted for determination of
rights to the use of any water, it shall be the duty of all
claimants interested therein to appear and submit proof of
their respective claims, at the time and in the manner
required by law. Any claimant who fails to appear in the
proceedings and submit proof of the claims of the claimant
shall be barred and estopped from subsequently asserting
any rights theretofore acquired upon the stream or other
body of water embraced in the proceedings, and shall be
held to have forfeited all rights to the use of the water there-
tofore claimed by the claimant."

26 Our answer to the court's question is limited to the facts, as we understand
them to exist in the Klamath Basin adjudication-i.e., that the United States has
filed a claim for legal title to the water right that it appropriated under the 1905
Oregon statute. We express no opinion on the permissible procedure if the person
who appropriated the water right fails to file a claim for that right in the water
rights adjudication, and another person claims only an equitable interest in that
right.

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The United States argues that "[l]andowners asserting
vested property rights in the use of water diverted by the
Klamath Project are 'claimants' interested in the 'determi-
nation of rights to the use' of the water in the Klamath Basin.
Accordingly, any such rights must be claimed in the
[a]djudication or be forfeited." Plaintiffs and the State of
Oregon argue that, under Oregon law, a state water rights
adjudication is a comprehensive proceeding to determine the
relative rights of persons who have appropriated water rights
and, as a consequence of that determination, issue water
rights certificates. They argue that persons holding deriva-
tive rights, whether in equity or contract, are not claimants
within the meaning of ORS 539.210 and need not file a claim
in the water rights adjudication.

Oregon's water code does not define the term "claim-
ant," and both the United States and plaintiffs have proposed
plausible interpretations of that term. The statutory context,
however, cuts against the United States' interpretation in
two respects. First, what is now ORS 539.210 was first
enacted as part of Oregon's 1909 water code, and the current
version of ORS 539.210 is virtually identical to that provision
as it first was enacted. Compare ORS 539.210, with Or Laws
1909, ch 216, § 34. When the Oregon legislature adopted the
1909 code, it did not define the term "claimant." However, it
used that term to refer to a person who had appropriated a
water right and could thus claim legal title to the right; for
example, it required "claimants" to file a statement setting
out facts necessary to establish an appropriation. See Or
Laws 1909, ch 216, § 14. Conversely, it did not require "claim-
ants" to file a statement showing that they had a right to take
water under another person's appropriation. Given that con-
text, we conclude tentatively that the term "claimant," as
used generally in the 1909 act and as used specifically in the
section that became ORS 539.210, does not refer to a person
asserting only an equitable or beneficial property interest in
a water right that another person appropriated.

A second statutory clue points in the same direction.
Under Oregon's water code, a claim for water, if proved,
results in the issuance of a certificated water right giving the
holder title to the right. See Fort Vannoy, 345 Or at 84
(describing that process); ORS 539.140 (same). A person

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claiming an equitable interest in a water right does not
receive a certificated right. See Fort Vannoy, 345 Or at 84-86
(recognizing that a member of an irrigation district had an
equitable interest in a certificated water right issued to the
district). By implication, a person holding an equitable inter-
est need not file a claim in a water rights adjudication and is
thus not a "claimant" within the meaning of ORS 539.210.

That has long been the rule in Oregon. As this court
explained 85 years ago, "[i]f this were a proceeding for deter-
mining the relative rights between different appropriators
[i.e., a streamwide adjudication], the court would not con-
sider the controversy between an appropriator and those
claiming under him." Willow Creek, 119 Or at 191. Under
Oregon law, controversies between appropriators and those
claiming under them are not part of a water rights adjudica-
tion to determine the relative rights of different appropria-
tors. The court has, however, recognized one exception, and
that exception proves the rule, as the facts in Willow Creek
illustrate.

In Willow Creek, two persons had initiated a water
rights adjudication in 1909 to determine the right to use the
water in Willow Creek. Id. at 163.27 The Willow Creek Land
and Irrigation Company (the irrigation company) had appro-
priated water from that creek for others' use, and the irriga-
tion company (but not its shareholders who claimed a bene-
ficial property right) appeared in the 1909 adjudication. Id. at
163, 181-82. Some of the irrigation company's water rights
"had become vested through appropriation and use, while
others were at that time inchoate." Id. at 163. Recognizing
that fact, the first decree entered in 1916 provided that the
irrigation company would be allowed until January 1, 1918,
"to complete its said irrigation system and apply the
impounded waters to beneficial use." Id. at 163-64.28

27 The water rights adjudication in Willow Creek arose under Oregon's 1909
water rights code. See In re Willow Creek, 74 Or 592, 144 P 505, 146 P 475 (1915)
(considering challenges to the procedure that gave rise to the first decree regarding
Willow Creek).

28 The inchoate water rights apparently resulted from the common-law rule,
stated in Nevada Ditch, that one person can appropriate water for future users
with an appropriation date that relates back to the date of the notice, as long as the
water is diverted and put to beneficial use within a reasonable time. In Willow
Creek, the 1909 streamwide adjudication occurred before a reasonable time had

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In 1920, the state gave notice to all parties inter-
ested in the inchoate rights of the irrigation company to
appear and determine the extent to which those inchoate
rights had been realized. The irrigation company29 appeared
at the supplemental proceeding and argued that the only
issue properly before the court was the extent to which water
had been put to beneficial use-i.e., the extent to which the
inchoate rights had been realized. Persons who had agreed to
purchase land and appurtenant water rights from the irri-
gation company appeared and claimed that the irrigation
company unlawfully had prevented them from putting water
to beneficial use on their lands by putting the water to use
instead on the company's lands. Id. at 182, 191-92. Those per-
sons did not own the water rights directly but held shares in
the irrigation company, which claimed legal title to the water
right. Id. at 165.

In resolving the parties' arguments, this court noted
that the only issue before it was the right to water under a
single certificate and that the disputes between an appropri-
ator and persons taking under the appropriator "ordinarily
would not be considered in a proceeding of this nature"-i.e.,
in a supplemental proceeding to adjudicate rights among dif-
ferent appropriators. Id. at 182. The court reasoned, how-
ever, that it could not determine the land on which the water
had been put to beneficial use and thus could not issue a
water rights certificate to the irrigation company without
first resolving the subsidiary dispute between the irrigation
company and the persons who took water under it. Id. In
resolving that subsidiary dispute, the court held that the irri-
gation company could not use the water it had appropriated
to benefit its land to the detriment of the persons who had

passed, with the result that the 1916 decree recognized that the irrigation company
held inchoate water rights but that the court could not determine the extent of
those rights at that time.

29 Between the 1909 adjudication and the 1920 supplemental adjudication, the
irrigation company transferred the irrigation works and the water rights to a hold-
ing company. Willow Creek, 119 Or at 165, 179. The irrigation company sold land to
settlers and gave them a proportionate share of the stock in the holding company.
Id. at 165. The irrigation company also went into bankruptcy during that period,
and another corporation acquired its remaining assets. Id. Those corporate
changes are not material to our answer to the Federal Circuit's third question, and
we have referred solely to the "irrigation company" for ease of reference.

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acquired land and derivative water rights from it. Id. at 196-
98. The court determined the land to which the water rights
attached and held that the irrigation company "is entitled to
a certificate of its water right for the benefit of the land
owned by its stockholders." Id. at 199.

Willow Creek is telling in at least four respects. First,
the court recognized that the irrigation company held the
water right for the benefit of the stockholders. Second, the
court did not hold that the stockholders' failure to file a claim
in the initial adjudication precluded them asserting an equi-
table interest in the certificated water right that the irriga-
tion company sought. Third, the court recognized that, as a
general rule, the only claims that will be adjudicated in a
water rights adjudication are the competing claims of differ-
ent appropriators, not the equitable interests of those per-
sons who take under an appropriator. Finally, it held that
that rule is not without exceptions; controversies between an
appropriator and the persons who take under that appropri-
ator may be resolved in a general adjudication when neces-
sary to determine the extent of a certificated water right.

Given Willow Creek and the other statutory context
discussed above, we conclude that the term "claimant" in
ORS 539.210 refers to persons claiming legal title to a water
right. The term does not include persons asserting only an
equitable or beneficial interest in a water right that another
person appropriated. It follows that, to the extent that plain-
tiffs assert only a beneficial or equitable property interest in
water rights that the United States appropriated, plaintiffs
are not claimants within the meaning of ORS 539.210 who
must file claims in the Klamath Basin adjudication or lose
their right to claim a beneficial or equitable property interest
in that water right.

It is necessary to add a caveat to our answer. Given
the limited record before us, we cannot foreclose the possibil-
ity that circumstances comparable to those in Willow Creek
might arise in the Klamath Basin adjudication that would
permit, in that adjudication, the determination of the inter-
ests of persons claiming an equitable or beneficial property

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interest in a water right that another person had appropri-
ated. Subject to that caveat, however, we can say that per-
sons asserting only an equitable or beneficial property inter-
est in a water right that someone else appropriated are not
"claimants" within the meaning of ORS 539.210 who must
file claims in the Klamath Basin adjudication.

IV

In summary, in answering the Federal Circuit's
questions, we have assumed that the United States appropri-
ated the right to use the waters described in its notice and
that it presently holds legal title to that water right. We also
have assumed that plaintiffs are asserting only an equitable
or beneficial property interest in the water right to which the
United States holds legal title. Who presently holds legal title
to that water right and the scope of that right are questions
for the Klamath Basin adjudication, and we express no opin-
ion on those issues. Given those assumptions, we have
answered the court's questions as follows:

1\. The 1905 Oregon act did not preclude plaintiffs
from acquiring an equitable or beneficial property interest in
a water right to which the United States holds legal title.
Moreover, under the 1905 act, a formal written release from
the United States is not necessary for plaintiffs to have
acquired an equitable or beneficial property interest in the
water right that the United States appropriated.

2\. Under Oregon law, whether plaintiffs acquired
an equitable or beneficial property interest in the water right
turns on three factors: whether plaintiffs put the water to
beneficial use with the result that it became appurtenant to
their land, whether the United States acquired the water
right for plaintiffs' use and benefit, and, if it did, whether the
contractual agreements between the United States and
plaintiffs somehow have altered that relationship. In this
case, the first two factors suggest that plaintiffs acquired a
beneficial or equitable property interest in the water right to
which the United States claims legal title, but we cannot pro-
vide a definitive answer to the court's second question
because all the agreements between the parties are not
before us.

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3\. To the extent that plaintiffs assert only an equi-
table or beneficial property interest in the water right to
which the United States claims legal title in the Klamath
Basin adjudication, plaintiffs are not "claimants" who must
appear in that adjudication or lose the right. As a general
rule, equitable or beneficial property interests in a water
right to which someone else claims legal title are not subject
to determination in a state water rights adjudication.

The certified questions are answered.

WALTERS, J., concurring.

The court answers "no" to the restated second ques-
tion posed by the Federal Circuit: whether, under Oregon
law, beneficial use alone is sufficient to acquire a beneficial or
equitable property interest in a water right to which another
person holds legal title. 348 Or at 40-41.1 I agree with that
answer and with the majority's further statement that, even
considering additional factors, we cannot reach a definitive
answer to a more pointed question-whether plaintiffs in
this case acquired a beneficial or equitable property interest
in a water right held by the United States. 348 Or at 50.

I write to explain the reasons that the latter, more
specific, question is an open one that, in my view, cannot be
resolved at this time on this record.

First, this case reaches us in a posture in which the
following issues are contested in the Klamath Basin adjudi-
cation and have not been decided by any court: (1) whether
beneficial use is necessary to the United States' appropria-
tion of water rights; (2) whether the United States has appro-
priated the water rights at issue here; and (3) whether plain-
tiffs also have appropriated water rights and own them
independently or jointly with the United States. 348 Or at 36
n 14. In answering the questions posed by the Federal
Circuit, we are nevertheless asked to assume that the United
States has appropriated and acquired sole ownership of the
water rights at issue. See 348 Or at 36-37 ("[W]e assume that
the United States appropriated water rights pursuant to the

1 We do not expressly consider the interests of irrigation districts that "receive"
water from the Klamath Basin Reclamation Project.

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1905 statute and that it acquired and presently holds legal
title to use the water for the purposes stated in its notice.")
(footnote omitted); see also 348 Or at 55 (summarizing
assumptions used in answering certified questions). In other
words, we are asked to assume that the United States has
accomplished whatever measures were necessary to perfect
appropriation, without deciding whether beneficial use by
landowners was one of those measures and without deciding
whether plaintiffs also appropriated and acquired ownership
of the rights at issue.

When this court previously has considered the
nature of the interests of water users or providers, it has done
so on the premise that beneficial use is a necessary prereq-
uisite to perfection of appropriation and in the context of dis-
cussing perfected (and sometimes certificated and thereby
vested) appropriation. As the majority explains, it has been
the law in Oregon since at least 1896 that appropriation is
perfected "only when the ditches and canals are completed,
the water diverted from its natural stream or channel, and
actually used for beneficial purposes." Nevada Ditch Co. v.
Bennett, 30 Or 59, 90, 45 P 472 (1896). Thus, as the court
recently stated, in Fort Vannoy Irrigation v. Water Resources
Comm., 345 Or 56, 88, 188 P3d 277 (2008), a joint effort
between landowners and irrigation companies or districts
has been required to "bring the certificated water rights into
existence" and beneficial use has been one action required in
that joint effort.2 When we are asked to assume instead, as
we understand that we have been instructed to do, that ben-
eficial use may not be necessary to perfected appropriation,
and that plaintiffs do not hold perfected or certificated inter-
ests, our precedent, premised as it is on different assump-
tions, is of little assistance.

Second, the Federal Circuit Court has not defined
what it means by the term "beneficial or equitable property
interest." This court's prior consideration of the nature of the
interests held by landowners who apply water to beneficial

2 In Fort Vannoy, the water rights at issue were not only appropriated, they
were also certificated. As the court explained in that case, "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)." Fort
Vannoy, 345 Or at 76.

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use has not been for the purpose of determining whether
those interests are "property" as that term is used in the
United States or Oregon Constitutions or whether the gov-
ernment must pay just compensation if it "takes" those inter-
ests.3 When the court's prior cases use terms such as "equi-
table title," or liken the relationships between the parties to
other equitable relationships, they do so not only on the basis
of assumptions that are inapplicable here, but also for the
purpose of answering legal questions very different from the
one that the Federal Circuit poses. A brief survey of the ques-
tions addressed in those cases demonstrates my point.

In Eldredge v. Mill Ditch Co., 90 Or 590, 177 P 939
(1919), this court concluded that a quasi-public irrigation
company served as the agent of its stockholders when it deliv-
ered water for their use. The court held that equity precluded
a third-party judgment creditor from forcing a sale of the
company's interests to the detriment of the stockholders. Id.
at 596.

Re Rights to Waters of Silvies River, 115 Or 27, 237 P
322 (1925), was a case in which three men posted a notice of
appropriation and then formed a corporation to serve as their
agent in constructing irrigation ditches and making water
available for use. The court held that the priority date for the
water right that the corporation acquired related back to the
date of the men's original notice of appropriation. Id. at 98-
103.

In In re Waters of Walla Walla River, 141 Or 492, 16
P2d 939 (1933), this court reached a different conclusion con-
cerning a disputed priority date. The court held that a private
irrigation company that had appropriated water in 1903 was
the principal and that landowners who were not sharehold-
ers in the company, but who put its water to beneficial use
pursuant to rental contracts, served as the company's agents.
When some of the landowners later formed a new irrigation

3 As we noted in Doyle v. City of Medford, 347 Or 564, 570 n 4, 227 P3d
683 (2010), the question whether a state interest amounts to a federally protected
property interest (in that case under the Due Process Clause) is a federal question.
Although we can describe state interests, the legal conclusion as to whether those
interests constitute "vested rights" or "property" is a federal question.

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company, the new water rights acquired did not relate back
to the earlier 1903 appropriation because the landowners
previously had not obtained "any rights in the use of the
water supplied by [the original company] except those given
by, and to the extent of, their rental contracts." Id. at 498.

In Fort Vannoy, the court noted that a statute that
required an irrigation district to hold all property it acquired
"in trust for *** the uses and purposes set forth in the
Irrigation District Law," gave rise to a trust relationship
between the irrigation district and its members, 345 Or at 85-
86 (emphasis omitted), but the court characterized the rela-
tionship between the district and the landowners who put the
water to beneficial use as one of principal (district) and
agents (landowners). Id. at 88-90. To resolve the particular
question before it, the court looked to the statutory allocation
of rights and responsibilities between the irrigation district,
on the one hand, and its members and water users, on the
other hand, and concluded that neither the members nor the
users were "holder[s] of any water use subject to transfer."
Therefore, the court held, the members did not have the right
to change the point of diversion associated with the water
right. Id. at 86-93.

Although in each of those cases "the water of a public
stream [was] eventually applied to a beneficial use, and the
general purposes of such appropriations accomplished,"
Nevada Ditch, 30 Or at 98, factors other than intended ben-
efit or use determined the answers to the particular legal
questions presented. And, for the most part, those cases
involved the rights of third parties vis-à-vis the irrigation dis-
tricts. Only Fort Vannoy decided the nature of the interests
acquired by water users. In that case, it was the statutory
allocation of rights and responsibilities, not whether the leg-
islature intended that users benefit by the actions of irriga-
tion districts, that was determinative.

Labels and short-hand descriptions used by the
court in particular contexts for particular purposes do not
resolve other legal questions, particularly difficult ones. In
enacting and proceeding under the Reclamation Act, the
United States intended, among other things, to provide some

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benefit to the lands that it helped to irrigate. Our cases, how-
ever, have not decided whether a government's intent to
bestow such a benefit alone creates an interest of legal con-
sequence. Without actually resolving the threshold legal
issue of whether beneficial use is necessary to perfected
appropriation by the United States, without a clear under-
standing of the federal standard that a "beneficial or equita-
ble property interest" must meet, and without all the facts
necessary to determine whether that standard has been met,
we certainly can say that the answer to the Federal Circuit
Court's second question is "no," but I emphasize that that is
all that we can say.

Balmer and Linder, JJ., join in this opinion.