The land along the railroad right-of-way had been granted to the Northern Pacific by the federal government in return for the construction of a northern transcontinental railroad. One requirement of the 1864 Northern Pacific Land Grant was that the railroad had to sell the land that had been granted to it within five years of the completion of the line, in order to encourage settlement.
Among the St. Paul investors was Northern Pacific Railroad President Thomas Oakes (1843-1919). Oakes and several other officials of the Northern Pacific began formulating a scheme to buy land in the Yakima Valley for the purpose of building an irrigation system using Yakima River water in early 1889. Irrigating the land greatly increased its value, and the investors in the Yakima Land and Canal Company hoped to resell the irrigated land at a profit. The investors had been impressed with the quantity and quality of crops grown by a small group of settlers near Union Gap who had constructed a small irrigation system called the Konnewock Ditch and were farming 1,500 acres of irrigated land.
Walter N. Granger was a New York native who from 1884 to 1889 resided in Montana where he was responsible for construction of the Gallatin Canal, the Florence Canal and reservoir, and the Chestnut Canal. Oakes, aware of Granger's irrigation expertise, summoned him to the Yakima Valley in the hope that he would concur with the area's potential for irrigation. After touring the area briefly, Granger did so. Granger and the St. Paul investors hired a corps of engineers headed by J. D. McIntyre to survey the land and determine the best layout for an irrigation system. McIntyre completed his survey on November 2, 1889.
When the Yakima Land and Canal Company was formed, Walter Granger was named president and James Millisch and Albert Kleinschmidt of Helena, Montana, were named secretary and treasurer. Three months later the Northern Pacific Railroad Company purchased two-thirds of the Yakima Land and Canal Company's stock, in effect fulfilling its legal requirement to divest itself of its land by purchasing it itself. The company's name was changed to the Northern Pacific, Kittitas, and Yakima Irrigation Company. Northern Pacific employee Paul Schulze, who headed the railroad's land department, was named president and Walter Granger became vice president and general manager. Granger was charged with creating and implementing the irrigation system.
The Northern Pacific, Kittitas, and Yakima Irrigation Company hired William Hamilton Hall, a well-known irrigation engineer from California, to verify J. D. McIntyre's findings. The proposed irrigation canal was to be 42 miles long and irrigate 68,000 acres. It was named the Sunnyside Canal. In the midst of construction Walter Granger still found time for romance, marrying Yakima pioneer Maud Thomas in North Yakima in 1891.
On March 26, 1892, company officials, Tacoma Light and Water Company president Theodore Hosmer, Tacoma Land Company president I. W. Anderson, National Geographic Society founder and Moxee ranch owner Gardner Green Hubbard (1822-1897), and other notables arrived at the construction site from Tacoma on Paul Schulze's private train car and celebrated the completion of the first 25 miles. Doris Allen broke a bottle of champagne over the headgates near Union Gap.
The National Financial Panic of 1893 forced the Northern Pacific to withdraw from the company. Against all odds, Walter Granger managed to continue construction, even when Paul Schulze's financial improprieties and subsequent suicide forced his company into receivership in 1895. In 1900 the Washington Irrigation Company purchased the Sunnyside Canal, and extended the canal from Sunnyside to Prosser. In 1905 the Federal Bureau of Reclamation purchased the Sunnyside Canal and it became part of the Sunnyside Division of the Yakima Project.
