Oregon Supreme Court Rules Against Irrigator

By Water for Life, RETURN FLOWS Newsletter, 8/08

Fort Vannoy Irrigation District v. Water Resources Commission was a stunning decision because the Oregon Supreme Court held that irrigation districts are the holders and owners of water rights beneficially applied by its members but certificated in the name of the district. The Court held that water rights, like legal title to other property, vests in the irrigation district and are held by it in trust, are dedicated and set apart for, the uses and purposes set forth in the Irrigation District law. The Court also held that the Board of Directors for the irrigation district is authorized and empowered to hold, use, acquire, manage and dispose of a water right as provided in the Irrigation District law.

The Fort Vannoy case will surprise irrigators who believed that they owned the water right because they owned the appurtenant land and beneficially applied the water.

The Fort Vannoy case has significantly altered the water law of the State of Oregon. The practical and legal effects of this decision are both profound and far reaching. This is particularly true when you take into account that irrigated land was remapped and master water rights certificates in the name of the districts were issued.

The Fort Vannoy case began as a dispute between an irrigator and a district. The irrigator wanted to change the points of diversion associated with water rights issued 1930 but the certificates were held in the name of Fort Vannoy Irrigation District. The narrow legal issue before the Court was whether the irrigator was the holder of the water use subject to transfer as the phrase is used in ORS 540.510 (1). The Oregon Department of Water Resources agreed with the irrigator that the holder is the person who has the beneficial use of the water rights and owns the appurtenant land.

The Fort Vannoy Irrigation District did not argue on appeal that any harm or interference to any water right of another member would occur. Rather, the District argued that it was the holder and owner of the water right because the certificate was in its name.

The Court in Fort Vannoy agreed with the district and announced a trust relationship between irrigation districts and its members. The Court stated that the existence of the trust relationship bifurcates the ownership interest in each certificated water right. Such a trust implies two estates: one legal and one equitable. Legal title is held by the district as trustee while the irrigator holds the beneficial interest. The Court did impose a fiduciary duty on the District as a trustee to manage the water right that the members beneficially apply.

From a practical standpoint, the case seems to empower districts acting through its managers in a way never contemplated by irrigators, the Department or under Irrigation District law. Irrigators must first obtain approval of districts (probably irrigation managers) before any application is made to the Department. In fact, it is likely the district will have to sign any application as the applicant when the irrigation district holds the water right certificate

The irrigator in the Fort Vannoy case, Ken-Wal Farms, is asking for reconsideration. Water for Life will join that request for reconsideration. One of the legal questions to be answered is whether the decision results in a condemnation of irrigators’ water rights. The answer may require a case-by-case analysis of four issues examined by the Supreme Court: (1) the issuance of the water right certificate: (2) the trust relationship that exists between a district and an irrigator: (3) the beneficial use of the water provided under the certificate: and (4) the ownership of the appurtenant land. It is the first issue that seems to have the most weight according to the Supreme Court.

In summary, the Oregon Supreme Court denied the irrigator’s application to change the point of diversion because the irrigator was neither the holder nor the owner of the water right. The irrigator was, therefore, not authorized under ORS 540.510(1) to change the point of diversion with the District’s consent.

Contributor: Michael W. Peterkin, Attorney Peterkin & Associates Author of Amicus Brief for Water for Life in Fort Vannoy

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