HomeMy WebLinkAboutBozeman v Utility Solutions Bozeman Opening Brief
IN THE SUPREME COURT OF THE STATE OF MONTANA Cause No.: DA 19-0680
CITY OF BOZEMAN,
Petitioner / Appellant,
v.
MONTANA DEPARTMENT OF NATURAL
RESOURCES AND CONSERVATION, an
agency of the State of Montana, and UTILITY
SOLUTIONS, LLC,
Respondents / Appellees
PETITIONER / APPELLANT CITY OF BOZEMAN'S OPENING BRIEF
On Appeal from the Montana Eighteenth Judicial District Court, Gallatin County
Cause No. DV-18-1323B
Hon. Rienne H. McElyea, District Court Judge Presiding
Matthew W. Williams
WILLIAMS & JENT, PLLP
506 East Babcock
Bozeman, MT 59715
Telephone: (406) 586-1373
Facsimile: (406) 586-4548
Email: Mattheww53@aol.com
Attorney for Utility Solutions, LLC
Peter G. Scott
Peter G. Scott, Law Offices, PLLC
682 South Ferguson Ave, Suite 4
Bozeman, MT 59718-6491
Telephone: (406) 585-3295
Facsimile: (406) 585-3321
Email: peter@scott-law.com
office@scott-law.com
Attorneys for Petitioner / Appellant
City of Bozeman
Barbara Chillcott
Cameron S. Boster
Special Assistant Attorneys General
Montana Department of
Natural Resources and Conservation
Post Office Box 201601
Helena, MT 59601
Telephone: (406) 444-5258
Email: Barbara.Chillcott@mt.gov
Cameron.Boster@mt.gov
Attorneys for Montana Department of
Of Natural Resources and Conservation
i
TABLE OF CONTENTS
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
STATEMENT OF THE ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF THE FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
A. DNRC’s Finding that Utility Solutions' Change Application Fills
in a Service Area "Gap" is Clearly Erroneous and the Resulting
Agency Action is Prejudicial to the City . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. By Statute Utility Solution Was Required to Show That a Change
Application Will Not Adversely Affected the City Of Bozeman’s
Planned Use of Water, Held by the City Under Rights Issued for the
Purpose of Meeting Future Municipal Demand Within the Area
Designated by the City’s Publicly Adopted Growth Policy . . . . . . . . . . . . . 16
1. The Supreme Court Requires Statutory Interpretation
to Begin with the Plain Meaning of Legislative Language,
Which Requires the Applicant to Show that a Change in
Use of Water Will Not Adversely Affect Another
Person’s Planned Use of Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2. The Structure of Water Use Act (“WUA”) Does Not Support
DNRC’s Interpretation that Only Discrete Elements of a
Water Right are Protected from being “adversely affected” by
a Change Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ii
3. DNRC and the District Court Rely on Authorities that
Do Not Apply to the Issue of First Impression
Concerning Statutory Protections for a City’s Planned
Municipal Uses of Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4. The City has a Legal Right to Use Water to Meet
Municipal Demand in the Disputed Area Under a
Purchase Contract with DNRC for Shares in Water
Rights that DNRC Issued to DNRC for that Purpose . . . . . . . . . . . . 28
C. DNRC’s Impermissibly Narrow Interpretation of the Change Statute
Undermines the Important Value of Tying Future Municipal Water
Use to Sound Public Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
iii
TABLE OF AUTHORITIES
Cases Page
Brown v. Gardner,
(1994), 513 U.S. 115 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Curry v. Pondera Cty. Canal & Reservoir Co.,
383 Mont. 93, 109, 370 P.3d 440, 451 (2016) . . . . . . . . . . . . . . . . 22-23, 26
City of Billings v. Pub. Serv. Comm'n of Montana,
193 Mont. 358, 368-69, 631 P.2d 1295, 1302 (1981) . . . . . . . . . . . . . . . . . . 15
Denke v. Shoemaker,
2008 MT 418, ¶ 39, 347 Mont. 322, 198 P.3d 284 . . . . . . . . . . . . . . . . . 10
Gregg v. Whitefish City Council,
2004 MT 262, ¶ 38, 323 Mont. 109, 99 P.3d 151 . . . . . . . . . . . . . . . . . . . . 21
Hughes v. Mont. Bd. of Med. Examiners,
2003 MT 305, ¶ 11, 318 Mont. 181, ¶ 11, 80 P.3d 415, ¶ 11 . . . . . . . . 10, 15
In re Archer,
332 Mont. 1, 5, 136 P.3d 563, 565 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . 18
In re Kesl's Estate,
117 Mont. 377, 386, 161 P.2d 641, 646 (1945) . . . . . . . . . . . . . . . . . . . . 21
Kottel v. State,
312 Mont. 387, 402, 60 P.3d 403, 414 (2002) . . . . . . . . . . . . . . . . . . . . . 20
Stadler v. City of Helena,
46 Mont. 128, 127 Pac. 454 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 23, 28
State v. Dist. Court of Fourth Judicial Dist., in & for Ravalli Cty.,
51 Mont. 305, 152 P. 745-747 (1915) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 22
State ex rel. Bitter Root Valley Irrigation Co. v. Fourth Judicial Dist.,
51 Mont. 305, 152 P. 745 (1915) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
iv
Town of Manhattan v. Dep't of Nat. Res. & Conservation of State,
364 Mont. 450, 451, 276 P.3d 920, 921 (2012) . . . . . . . . . . . . . . . . . . . 25-26
Western Energy Co. v. State, Dept. of Revenue,
1999 MT 289, ¶ 11, 297 Mont. 55, ¶ 11, 990 P.2d 767, ¶ 11 . . . . . . . . . . . . 18
Williams Insulation Co. v. Dep't of Labor & Indus.,
2003 MT 72, ¶ 22, 314 Mont. 523, ¶ 22, 67 P.3d 262, ¶ 22 . . . . . . . . . . . . 10
Zinvest, LLC v. Gunnersfield Enterprises, Inc.,
389 Mont. 334, 342, 405 P.3d 1270, 1276 (2017) . . . . . . . . . . . . . . . 21, 22
Statutes and Session Law
Mont. Code Ann. § 1-2-101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Mont. Code Ann. § 2-4-704 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Mont. Code Ann. § 2-4-704(2)(a)(vi) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mont. Code Ann. § 76-1-601 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
Mont. Code Ann. § 76-1-601 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
Mont. Code Ann. § 85-1-103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Mont. Code Ann. § 85-2-308 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Mont. Code Ann. § 85-2-308(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
Mont. Code Ann § 85-2-343 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mont. Code Ann. § 85-2-360 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Mont. Code Ann. § 85-2-401 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Mont. Code Ann. § 85-2-402 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 16
Mont. Code Ann. § 85-2-402(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
v
Mont. Code Ann. § 85-2-402(2)(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Passim
Mont. Code. Ann. § 85-2-402(2)(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Rules
Mont. Admin. R. 36.12.117(9)(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Mont. Admin. R. 36.12.1903(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other State Statutes
Idaho Code, Section 42-202B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 32
RCW 90.03.383(2)(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 32
Publications
Guidance For Municipal Purposes & Water Rights
Montana Department of Natural Resources and Conservation . . . . . . . Passim
CITY OF BOZEMAN'S OPENING BRIEF | 1
I. STATEMENT OF ISSUES
1. Should a state agency’s Final Order, granting an Application to change a place
of use, be denied or modified where the Application provides incorrect
information about the location of a municipal service area and the order is
based on clearly erroneous findings that the change will fill a nonexistent
service area gap.
2. Does a City’s plan to use water within the area designated in a duly adopted
Growth Policy constitute a “planned use’ of water for the purposes of § 85-2-
402(2)(a), MCA, where the City holds a legal right to use water for municipal
purpose under rights issued to meet future demand in a place of use that
includes the City’s designated planning area?
a. If yes, does § 85-2-402(2)(a), MCA, require a private water
company applying to change the place of use for its appropriation
right to overlap the City’s designated planning area, to show by a
preponderance of evidence that the proposed change will not
adversely affect the City’s planned use of water?
b. If yes, does granting a change application so a private water
company can serve future municipal demand in the City’s planned
place of use, where the City holds a legal right to use water for the
same purpose, ‘adversely affect’ the City’s planned use of water
within the meaning of § 85-2-402(2)(a), MCA?
II. STATEMENT OF THE CASE
On March 27, 2017, Utility Solutions, LLC ("Utility Solutions" or "US"),
submitted Application to Change Water Right 41H 30110660, seeking to change the
place of use for Beneficial Water Use Permit No. 41H 30046241 (hereinafter
"Application"). Administrative Record ("AR") at 0036-0103. On January 19,
2018, the Department of Natural Resources and Conservation (“DNRC”) issued a
CITY OF BOZEMAN'S OPENING BRIEF | 2
Preliminary Determination to Grant Change. AR 0013-0034. On April 11, 2018,
the City of Bozeman (“City”) timely filed an Objection to Application. AR 0166-
0177. On May 1, 2018, DNRC issued a Change Objection Validity Form. AR
0165. On September 7, 2018, the City filed a Motion for Summary Judgment with
a supporting brief and Affidavit of Brian Heaston, Senior Engineer for City. AR
0220-0227 and 0230-0289. On the same day, US filed its Motion for Summary
Determination and Brief in Support. AR 0290-0298. On September 21, 2018, the
parties filed responding briefs. AR 0214 - 0219 (City) and 0207-0213 (US). On
October 2, 2018, the City filed a reply brief. AR 0197-0204. On November 29,
2018, DNRC issued a Final Order on Motions Granting the Application (DNRC’s
Final Order”). AR 0002-0011. On December 1, 2018, the City of Bozeman filed
a petition for review of the Final Order in district court pursuant to the Montana
Administrative Procedures Act (“MAPA”), Title 2, Ch. 4, Montana Codes
Annotated, (“MCA”). On November 6, 2019, following briefing and oral
argument, the District Court entered its Order on Petition for Judicial Review
affirming DNRC’s Final Order. The City appeals from that order.
III. STATEMENT OF FACTS
1. On June 1, 2009, the City adopted its current Growth Policy pursuant to § 76-1-
601 et seq, MCA; the City's Water Facility Plan is expressly adopted as an
element of the City's Growth Policy. AR 231. Affidavit of Brian Heaston
(“Heaston Aff.”), ¶ 7. AR 299. (Community Plan at 12-6 and App H). Among
other things, the 2009 Growth Policy expanded the City’s 2001 planning
CITY OF BOZEMAN'S OPENING BRIEF | 3
boundary. AR 243 (Heaston Aff., Ex. 2). In July 2017, the City updated its
Water Facility Plan boundary. The City’s existing planning boundary abuts
Utility Solution’s original place of use (i.e., before the Application). AR 282.
2. In March 2017, Utility Solutions filed its Application seeking to change the place
of use for Beneficial Water Use Permit No. 41H 30046241 to expand the
company’s service area so Utility Solutions can provide municipal water service
in "gaps" between service areas for the City of Belgrade, City of Bozeman and
the Rae County Water and Sewer District. AR 42 (NIR.1.C). The Application
was determined to be correct and complete on September 22, 2017.1 AR 13.
3. In support of its Application, Utility Solutions prepared and provided a map
erroneously depicting the “City of Bozeman Service Area” based on the City’s
outdated 2001 Growth Policy planning boundary.2 AR 87. The Application
seeks to move Utility Solutions’ existing place of use one-half (1/2) mile to the
east. AR 89. The Application was signed under oath. AR 53. The
Application was wrong. There is no gap between Utility Solutions original
place of use and the City’s Service Area. The change in place of use proposed
in the Application overlaps approximately 2,600 acres of City’s Service Area
adopted pursuant to the City’s 2009 Growth Policy and updated Water Facility
Plan (the “Disputed Area”). AR 232 and 282 (Heaston Aff., ¶13, Ex. 12); See
also AR 11.
4. Under Claim 41H 119496 00, DNRC claims an existing perfected right to sell
water stored in Hyalite Reservoir for purposes that include municipal use in the
Disputed Area. AR 231 (Heaston Aff. ¶ 12).
5. DNRC issued Reservation 70118-41H with a 1985 priority to meet “future
demands by municipal users.” AR 273 (Finding of Fact A.3.) and AR 281
1 The district court points out that the Application was filed before the City updated
its Water Facility Plan Update in July 2017. Order at 3. However, the record
clearly shows that the City’s Water Facility Plan was updated before the Application
was found correct and complete in September, 2017. AR 13.
2 The district court appears to attach significance to the fact that the City refers to
its Planning Boundary as its “Service Area.” Order at 3. The law of municipal
service areas is discussed below. The Court is asked to note that the City is merely
repeating what Utility Solutions said in its Application and what DNRC found in the
Preliminary Determination. See AR 16 (Finding of Fact “FOF”) 2.
CITY OF BOZEMAN'S OPENING BRIEF | 4
(Heaston Aff., Ex. 11.). DNRC conditioned the volume of water reserved for
future municipal demand on the planned expansion of Hyalite Reservoir. AR
0279 (Heaston Aff., Ex. 10 – Reservation 70118-41H Order). After Hyalite
was expanded, DNRC issued Provisional Permit 41H 58294 00 for municipal
use with a place of use that includes the Disputed Area. AR 231 (Heaston Aff.,
¶ 12; AR 0255-258 (Heaston Aff, Ex. 7). Thereafter, DNRC reduced the
volume of water reserved for future municipal use under Reservation 70118-
41H. See AR 0246 (Heaston Aff., Ex. 5).
6. DNRC contracted with the City, granting the City a legal right to deliver water
from Hyalite to the Disputed Area for municipal purposes. AR 247. DNRC’s
Hearing Examiner expressly found that the City’s interest in Provisional Permit
41H 58294 00 and Claim 41H 119496 00 legally entitles the City to deliver water
in the Disputed Area for municipal use. AR 0005-6 (Final Order at 4-5); see
also AR 0253-0258 (Heaston Aff., Ex 7). The City holds interests in
Provisional Permit 41H 58294 00 and Claim 41H 119496 00 to meet planned
future needs in the City’s planning boundary, including the Disputed Area. AR
231 (Heaston Aff. ¶ 12).
7. A ‘possessory interest’ is a protected ownership interest. DNRC’s “Guidance
for Municipal Purposes & Water Rights” says “[w]hen reviewing water right
applications the Department is able to look at a properly adopted growth policy
under MCA 76-1-601 for purposes of possessory interest in the Place of Use.”
AR 286 (Heaston Aff. Ex. 13). The City of Bozeman properly adopted a growth
policy under § 76-1-601, MCA. The Disputed Area is within the City’s
planning boundary. The City of Bozeman holds a possessory interest to provide
municipal service in the Disputed Area.
8. Section 85-2-402(2) states: “Except as provided in subsections (4) through (6),
(15), (16), and (18) and, if applicable, subject to subsection (17), the department
shall approve a change in appropriation right if the appropriator proves by a
preponderance of evidence that the following criteria are met:
a. The proposed change in appropriation right will not adversely affect
the use of the existing water rights of other persons or other perfected
or planned uses or developments for which a permit or certificate has
been issued or for which a state water reservation has been issued
under part 3.”
CITY OF BOZEMAN'S OPENING BRIEF | 5
9. Section 85-2-308(3) states: “A person has standing to file an objection under this
section if the property, water rights, or interests of the objector would be
adversely affected by the proposed appropriation.” The City’s standing to
object is based on the adverse effect granting the Application will have on the
City’s possessory interest (created by its duly adopted growth policy) and its
planned use of water under rights that were issued to meet future municipal
demand in the Disputed Area.
10. Utility Solutions made no showing that Application to Change Water Right 41H
30110660 will not adversely affect the City’s planned use of water for which
Provisional Permit 41H 58294 00 and Claim 41H 119496 00 were issued.
11. DNRC did not look at or consider whether the Application will adversely affect
the possessory interest based on the City’s properly adopted Growth Policy.
12. DNRC did not look at or consider whether the Application will adversely affect
the City’s planned use of water for which Provisional Permit 41H 58294 00 and
Claim 41H 119496 00 were issued.
13. Granting Change No. 41H 30110660 will adversely affect the City's planned use
of water in the Disputed Area because any parcels served by Utility Solutions
will reduce the Place of Use available for planned uses and development of the
City's water rights. Heaston Aff., ¶ 14. In addition, upsetting the city's planned
facilities increases capital and O&M costs and is an intrusion upon the orderly
and efficient development of publicly owned and maintained infrastructure
which the city is compelled by § 76-1-601, MCA, to consider and include with
its Growth Policy. Heaston Aff., ¶ 15.
IV. SUMMARY OF ARGUMENT
Utility Solutions applied to change (expand) the company’s place of use
(“POU”) for the stated purpose of filling in “gaps” between existing municipal
service areas. There is nothing wrong with that, except that the Application, which
was signed under oath, misidentified the City of Bozeman’s (“City”) service area.
The Application identifies the City’s service area based on an outdated 2001 growth
CITY OF BOZEMAN'S OPENING BRIEF | 6
policy. But the City publicly amended its Growth Policy in 2009 and further
updated its service area in 2017. The City’s service area update was completed
before the Application was accepted by DNRC. At the time of Application, the
City’s service area abutted Utility Solutions’ existing POU and there was no gap to
be filled. DNRC found that the Application would fill in a service area gap where
no gap exists. DNRC’s findings in this regard are unsupported by substantial
evidence in the record and is clearly erroneous. Based on erroneous findings, the
Application was approved, granting Utility Solutions a legal right to serve future
municipal demand for about 2,600 acres where the City already established a legal
right to use water for the same purpose (the “Disputed Area”). The City’s rights
and interests are prejudiced as a result of the Application being granted.
The City objected because Utility Solutions failed to show that the
overlapping service areas will not adversely affect the City’s planned use of water
under rights issued and held by the City for that purpose. The requirement is found
in the change statute, § 85-2-402(2)(a), MCA. What constitutes an adverse effect
to a planned use of water for municipal purposes presents an issue of first impression.
DNRC denied the City’s objection, concluding that overlapping service areas are
permitted so a planned place of use is not protected from adverse effect under the
change statute. DNRC also concluded that water rights relied on by the City were
not “issued” for the City’s planned use. These conclusions are legally incorrect.
CITY OF BOZEMAN'S OPENING BRIEF | 7
The district court denied the City’s petition for review, ruling that “adverse effect”
can only occur when water from a shared source is made unavailable by a change.
The district court misapprehended the facts in concluding that DNRC’s erroneous
findings were not essential to the decision. The district court’s conclusions are also
legally incorrect.
In this case of first impression, no authority supports DNRC’s Final Order or
the district court’s ruling. The statute says water rights must be issued for the
planned use. DNRC filed Claim 41H 119496 00 and issued Provisional Permit 41H
58294 00 to store water in Hyalite Reservoir for future municipal demands. DNRC
contracted those rights with the City, granting the City a legal right to use that water
in the Disputed Area for future municipal demand. Clearly, water rights were
issued for the City’s planned use.
The plain language of the change statute protects the City’s planned use from
adverse effect. DNRC and the district court interpret “adverse effect” narrowly
based on cases that deal with interference of a person’s right to divert water from a
source. No authority says adverse effect is limited to discrete elements of a water
right. Nor is the protection limited to water rights. A “planned use” is not a water
right but it is protected from adverse effect. The change statute also prohibits
adverse effects on water quality or discharge permits, those are also not water rights.
The Water Use Act contains a provision for objecting, § 85-2-308, MCA, which
CITY OF BOZEMAN'S OPENING BRIEF | 8
protects property, water rights, or interests from being “adversely affected” by a
proposed change. The flawed interpretation renders these protections meaningless.
Place of Use (“POU”) is an element of a water right. This Application
impairs the City’s ability to use water beneficially in the planned place of use.
There is no practical difference between diminishing the amount of water from a
source or the place where it can be used beneficially. Either way, a “planned use”
is adversely affected. The law requires a water user must show a possessory interest
in the POU or obtain permission from the possessory interest holder. Typically, the
possessory interest in a POU is held by the owner who has an exclusive right of use.
However, municipalities do not own their POU. According to DNRC’s published
guidance for Municipal Water Rights, municipalities may satisfy the possessory
interest requirement by adopting a Growth Policy pursuant to § 76-1-601, MCA.
The City adopted a Growth Policy. Both Utility Solutions (in its Application) and
DNRC (in its preliminary determination) recognized that the City’s municipal
service area is defined by its Growth Policy. It necessarily follows that the City has
a possessory interest in the Disputed Area.
DNRC ignored its own guidance document and concluded that the City’s
possessory interest in the planned place of use is not protected from adverse effects
because places of use can overlap. But the right to divert water from a source also
is not exclusive. Somehow the right to divert water cannot be adversely affected
CITY OF BOZEMAN'S OPENING BRIEF | 9
but the right to put it to beneficial use can. The law requires a water user to
demonstrate it holds the possessory interest before making beneficial use of water.
According to DNRC, adoption of the Growth Policy satisfies the possessory interest
in a POU. DNRC’s erroneous interpretation sets municipal water users apart from
all other water users who enjoy the exclusive possessory interest.
Protection from adverse effect is not limited to water rights (or discrete
elements of water rights), it also includes property and other interests. In addition
to the possessory interest in the Disputed Area, the City owns a water utility that is
financed by its users. It also holds a legal right to use water for municipal purposes
in the Disputed Area under rights issued to meet future municipal demand. The
City invested public money to develop its planned use of water. All of this (the
City’s property, water rights, and other interests) will be adversely affected if the
Application is granted. DRNC and the district court erroneously interpreted these
express statutory protections out of the water code.
The district court should be reversed. DNRC’s Final Order should be
remanded with instructions to deny the Application or modify it to exclude the City’s
service area defined in the 2009 growth policy and updated water facility plan.
///
CITY OF BOZEMAN'S OPENING BRIEF | 10
V. STANDARD OF REVIEW
An agency decision may be reversed or modified if any of its findings,
inferences, or conclusions are “clearly erroneous” in light of the evidence, or made
in violation of statutory or constitutional authority, or is the agency has abused its
discretion. § 2-4-704, MCA. A reviewing court may not substitute its judgment for
that of the agency as to the weight of the evidence. The Supreme Court employs
the same standard when reviewing the district court's decision. Denke v.
Shoemaker, 2008 MT 418, ¶ 39, 347 Mont. 322, 198 P.3d 284. A three-part test is
used to determine whether an agency's findings are clearly erroneous: (1) after
review of the record, the findings must be supported by substantial evidence; (2) if
there is substantial evidence to support the findings, the Court will determine
whether the agency misapprehended the effect of the evidence; and (3) even if the
first two requirements are met, an administrative finding is clearly erroneous a
review of the record “leaves the [C]ourt with the definite and firm conviction that a
mistake has been committed.” Hughes v. Mont. Bd. of Med. Examiners, 2003 MT
305, ¶ 11, 318 Mont. 181, ¶ 11, 80 P.3d 415, ¶ 11. An agency's conclusions of law
are reviewed for correctness. Williams Insulation Co. v. Dep't of Labor &
Indus., 2003 MT 72, ¶ 22, 314 Mont. 523, ¶ 22, 67 P.3d 262, ¶ 22.
/ / /
CITY OF BOZEMAN'S OPENING BRIEF | 11
VI. ARGUMENT
A. DNRC’s Finding that Utility Solutions' Change Application Fills in
a Service Area "Gap" is Clearly Erroneous and the Resulting
Agency Action is Prejudicial to the City.
On March 27, 2017, Utility Solutions submitted Application to Change Water
Right 41H 30110660, seeking to change the place of use for Beneficial Water Use
Permit No. 41H 30046241 ("Application"). AR at 0036-0103. DNRC accepted
the Application as correct and complete on September 22, 2017. AR 13. The
stated purpose of the Application was to allow for municipal water service to
property located in supposed gaps between existing municipal service areas. AR
42 (NIR.1.C). The Application was signed under oath.3 AR 53. The
information provided in the Application was incorrectly based on an outdated City
growth policy. That proposed place of use overlaps the area understood by Utility
Solutions to be the City’s designated service area.
3 The Applicant’s oath is important because after the City objected, Utility Solutions
told the Agency that it "does not care what Bozeman plans. It intends to offer water
supplies at costs less than what any landowner would incur to develop his own
supplies, and less than what Bozeman will charge." AR 212. US’s intent to serve
property in the City’s service area is inconsistent with the sworn Application.
Either Utility Solutions misrepresented the purpose of its Application or
subsequently tried to take advantage of DNRC’s erroneous decision. Either way
Utility Solutions violated its oath.
CITY OF BOZEMAN'S OPENING BRIEF | 12
The City adopted its current growth policy in 2009, pursuant to § 76-1-601,
MCA et seq. AR 230 (Heaston Aff., ¶ 6). DNRC’s published guidance for
municipal water rights states “[w]hen reviewing water right applications the
Department is able to look at a properly adopted growth policy under MCA 76-1-
601 for purpose of possessory interest in the Place of Use.” AR 286. The 2009
enactment expanded the planning area previously adopted in the 2001 growth policy.
AR 243 (Heaston Aff., Ex. 2). The City's Water Facility Plan is expressly adopted
as an element of the City's Growth Policy. AR 231 (Heaston Aff., ¶ 7); AR 244
(Community Plan at 12-6). In July 2017, the City updated its Water Facility Plan.
District Court Order at 3. Thus, months before the Application was accepted by
DNRC as correct and complete, the City’s planning boundary abutted Utility
Solution’s original place of use (i.e., before the Application). AR 282 (Heaston
Aff., Ex. 12). There was no service area gap.
The Application incorrectly identified the outdated 2001 Growth Policy
planning boundary as the limit of the “City of Bozeman Service Area.” AR 87.
The Application proposed expanding Utility Solutions’ place of use one-half (1/2)
mile to the east to abut the City’s 2001 service area. AR 89; see also AR 243 and
282 (Heaston Aff., Exs. 2 and 12). DNRC did not look at the City’s growth policy.
See AR 137 (Notice Area Map prepared by DNRC refers to proposed POU as “gap”
between service areas). Had DNRC followed its own guidance document, it would
CITY OF BOZEMAN'S OPENING BRIEF | 13
have found that no “gap” exists between Utility Solutions’ preapplication place of
use and the City’s planning boundary. AR 282. As a result, the POU in the
Application overlaps approximately 2,600 acres of the City’s planning boundary (the
“Disputed Area”). AR 232 and 282 (Heaston Aff., ¶13, Ex. 12); See also AR 11.
DNRC’s findings rely exclusively on maps prepared by Utility Solutions’
engineers. AR 19-20 (Figs 1 and 2). Without looking, DNRC entered findings
that recognize and accept that the City's Service Area is defined by the 2001 growth
policy. AR 17 (FOF 3). No one challenged DNRC’s finding that the City’s
service area is defined by its growth policy boundary. The issue is whether it was
clearly erroneous to define the City’s Service Area based on an outdated growth
policy.
Agency decisions are reviewed, and may be reversed or modified, if the rights
of the appealing party have been prejudiced and "the administrative findings,
inferences, conclusions, or decisions are ... arbitrary or capricious or clearly
erroneous in light of the whole record...." Section 2-4-704(2)(a)(vi), MCA. Based
on incorrect information provided by Utility Solutions, DNRC found that granting
the Application would fill an imaginary "gap" between Utility Solutions’ existing
POU and the area where Utility Solutions (and DNRC) understood the City has an
established right to serve. AR 23 (Finding of Fact ("FOF") 10).
CITY OF BOZEMAN'S OPENING BRIEF | 14
Nor can it reasonably be asserted that the City’s rights and interests are not
prejudiced as a result of DNRC’s erroneous findings. Whether interference with
the City’s rights and interests constitutes an “adverse effect” within the meaning of
§ 85-2-402, MCA is addressed below. For the purpose of MAPA review, it is
undisputed that granting the Application will cause injury to the City. Specifically,
the City's right to use water beneficially within the Disputed Area will be adversely
affected because any parcels served by Utility Solutions will reduce the Place of Use
available for planned uses of water rights held by the City for that purpose. AR 232
(Heaston Aff., ¶ 14). In addition, construction of planned municipal water/sewer
infrastructure identified by facility plans and adopted by the 2009 Community Plan
require easements or rights-of-way. Interference with planned facility alignments
by a private provider's infrastructure increases costs of easement or right-of-way
acquisition for municipal infrastructure. Competition for desirable lands on planned
alignments increases public cost. Upsetting the City's planned facilities also
increases capital and O&M costs. The Application intrudes upon the orderly and
efficient development of publicly owned and maintained infrastructure, which the
City is compelled by § 76-1-601, MCA, to consider and include in its Growth Policy.
AR 232 (Heaston Aff., ¶ 15).
The district court denied relief from DNRC’s clearly erroneous findings,
concluding that the finding was not essential to the agency’s decision. Order at 13.
CITY OF BOZEMAN'S OPENING BRIEF | 15
The district court is mistaken. DNRC expressly approved the Application based on
an incorrect finding that the proposed place of use does not overlap with the area
where the City has established a possessory interest for municipal water service. It
turns out, and the record clearly shows, that the finding is wrong—no such gap
existed. DNRC’s findings are unsupported by substantial evidence and therefore
are clearly erroneous. Hughes, 2003 MT 305, ¶ 11.
When the City objected, DNRC determined that it does not matter because
service areas can overlap. AR 2 (DNRC’s Final Order). But service areas cannot
overlap. This Court looked at the question of a City’s authority to impose
requirements or provide service within the service area of another public utility and
concluded that it does not. The Court concluded,
We agree that the District is a separate utility with its own water service
area. The City is obligated by contract to sell water to the District and
has no standing to object to the water service area of that utility.
City of Billings v. Pub. Serv. Comm'n of Montana, 193 Mont. 358, 368–69, 631
P.2d 1295, 1302 (1981).
A mistake was made. Utility Solutions applied to expand its place of use to
fill gaps between municipal service areas using an outdated growth policy. DNRC
did not follow its own guidance and failed to review the City’s current growth policy.
The sworn Application (and DNRC’s findings) clearly demonstrate the change was
not intended to overlap with the area where the City holds a right to provide
CITY OF BOZEMAN'S OPENING BRIEF | 16
municipal service. That area was incorrectly identified in the Application. DNRC
found that granting the Application would fill in a service gap that does not exist
(i.e., would not overlap the City’s service area). Based on that finding, the
Application was approved. Because that finding is clearly erroneous, and because
the City is prejudiced as a result, the Court can (and should) order denial of the
Application. Alternatively, the Court should order modification of DNRC’s Final
Order to exclude the City’s planning area as it existed when the Application was
deemed correct and complete. The correct boundary is the “2017 Water Facility
Plan Update Planning Boundary,” adopted as part of the City’s 2009 growth policy.
AR 282 (Heaston Aff., Ex. 12).
B. By Statute Utility Solution Was Required to Show That a Change
Application Will Not Adversely Affected the City of Bozeman's
Planned Use of Water, Held by the City Under Rights Issued for
the Purpose of Meeting Future Municipal Demand Within the Area
Designated by the City’s Publicly Adopted Growth Policy.
If the Court declines to deny or modify DNRC’s Final Order based on
DNRC’s clearly erroneous finding that affected service areas do not overlap, it
should do so based on Utility Solutions’ failure to satisfy requirements of the change
statute. § 85-2-402, MCA. Applicable here is the requirement for applicants to
///
///
CITY OF BOZEMAN'S OPENING BRIEF | 17
show by a preponderance of evidence that the proposed change in any appropriation
right,
will not adversely affect the use of the existing water rights of other
persons or other perfected or planned uses or developments for which a
permit or certificate has been issued or for which a state water
reservation has been issued under part 3.
§ 85-2-402(2)(a), MCA (emphasis added). The City objected because Utility
Solutions made no showing and because the decision to grant Utility Solutions an
overlapping service area will, in fact, adversely affect the City’s planned use of water
in the Disputed Area.
The plain language of § 85-2-402(2)(a), MCA, requires applicants to show
that a proposed change will not adversely affect another person’s planned use of
water. No one disputes that the City adopted formal plans to use water in the
Disputed Area. No one disputes that the City holds a legal right to deliver municipal
water in the Disputed Area under rights issued to provide for future municipal
demand. And it is not disputed that the City’s ability to use water as planned will
be impaired by the Application.
Nevertheless, DNRC denied the City’s objection, concluding as a matter of
law, a change application “that results in the geographic overlap of the place of use
with the [City’s] Growth Policy and Water Facility Plan does not result in adverse
effect as contemplated under § 85-2-402(2)(a), MCA.” AR 9. DNRC also
CITY OF BOZEMAN'S OPENING BRIEF | 18
concluded that no water rights were issued for the City’s planned use. AR 6. In
denying the City’s MAPA petition for review of DNRC’s Final Order the district
court concluded that “adverse effect” means only a diminishment in the amount of
water available for use. District Court Order at 13. The district court did not
consider adverse effect on the City’s interests such as its possessory interest, or its
legal right to use water for municipal purposes, in the Disputed Area.
1. The Supreme Court Requires Statutory Interpretation to
Begin with the Plain Meaning of Legislative Language,
Which Requires the Applicant to Show that a Change in Use
of Water Will Not Adversely Affect Another Person’s
Planned Use of Water.
What constitutes an adverse effect of a planned use of water for municipal
purposes under the change statute presents an issue of first impression. According
to the legislature, the “object of the [Water Use Act] is to promote the prosperity and
welfare of the people of Montana through the sound management of the state's water
resources, and its provisions are to be given a liberal interpretation.” § 85-1-103,
MCA (emphasis supplied). This Court has long held that:
Legislative intent is ascertained, in the first instance, from the plain
meaning of the words used. If the intent of the legislature can be
determined from the plain meaning of the words used, the plain
meaning controls and the court need go no further nor apply any other
means of interpretation.
In re Archer, 332 Mont. 1, 5, 136 P.3d 563, 565 (2006) (emphasis supplied) citing
Western Energy Co. v. State, Dept. of Revenue, 1999 MT 289, ¶ 11, 297 Mont. 55,
¶ 11, 990 P.2d 767, ¶ 11.
CITY OF BOZEMAN'S OPENING BRIEF | 19
Both DNRC and the district court ignore the legislature’s objective and this
Court’s direction by narrowly interpreting § 85-2-402(2)(a), MCA, based on
distinguishable authorities without considering the plain meaning of the language.
Both conclude, as a matter of law, that the City’s planned use of water cannot be
adversely affected ‘within the meaning of the statute’ because the change does not
diminish the amount of water available for the City’s planned use. That conclusion
is not consistent with the plain meaning of the statute, which requires applicants to
show that a proposed change will not adversely affect (i.e., interfere with) a planned
use of water. As shown below place of use is an element of a water right. In order
to use water a person must have water and a place of use, among other things.
In short, the legislature plainly intended that planned use of water cannot be
adversely affected by a change application. Utility Solutions did not (and cannot)
make the required showing. Indeed, contrary to its sworn Application, Utility
Solutions admitted that it intends for its Application to interfere with the City’s
planned use of water. See AR 212 (Utility Solutions "does not care what Bozeman
plans. It intends to offer water supplies at costs less than what any landowner would
incur to develop his own supplies, and less than what Bozeman will charge.").
Utility solutions did not comply with the statute and the Application should be
denied.
CITY OF BOZEMAN'S OPENING BRIEF | 20
2. The Structure of Water Use Act (“WUA”) Does Not Support
DNRC’s Interpretation that Only Discrete Elements of a
Water Right are Protected from being “adversely affected”
by a Change Application.
Sticking with statutory construction and the district court’s admonition for a
holistic interpretation, the same language used throughout a statute is presumed to
have the same meaning throughout. State v. Dist. Court of Fourth Judicial Dist., in
& for Ravalli Cty., 51 Mont. 305, 152 P. 745, 747 (1915) (“Where the same word or
phrase is used in different parts of a statute, it will be presumed to be used in the
same sense throughout”); see also Kottel v. State, 312 Mont. 387, 402, 60 P.3d 403,
414 (2002) citing State ex rel. Bitter Root Valley Irrigation Co. v. Fourth Judicial
Dist. (1915), 51 Mont. 305, 152 P. 745; and Brown v. Gardner (1994), 513 U.S. 115.
The phrase “adversely affect” is used multiple times in the WUA. Under the
change statute, a proposed change may not “adversely affect” 1) the use of the
existing water rights of other persons, or 2) other perfected or planned uses or
developments for which a permit or certificate has been issued or for which a state
water reservation has been issued under part 3. § 85-2-402(2)(a), MCA. Subsection
(2)(f) of the change statute says “[t]he water quality of an appropriator will not be
adversely affected.” Subsection (2)(g) says “[t]he ability of a discharge permit
holder to satisfy effluent limitations of a permit issued in accordance with Title 75,
chapter 5, part 4, will not be adversely affected.”
CITY OF BOZEMAN'S OPENING BRIEF | 21
In Subsection (2)(e) the legislature says, “amount of water.” Under the tenants
of statutory construction if “amount of water” means “amount of water” then
“planned use” means something else.4 Zinvest, LLC v. Gunnersfield Enterprises,
Inc., 389 Mont. 334, 342, 405 P.3d 1270, 1276 (2017); see also Gregg v. Whitefish
City Council, 2004 MT 262, ¶ 38, 323 Mont. 109, 99 P.3d 151 (“Different language
is to be given different construction.”); In re Kesl’s Estate, 117 Mont. 377, 386, 161
P.2d 641, 646 (1945) (citations and internal quotations omitted) (“It is a settled rule
of statutory construction that, where different language is used in the same
connection in different parts of a statute, it is presumed the legislature intended a
different meaning and effect.”). The legislature could have required applicants to
show that a change will not reduce the “amount of water” needed for other water
users, but it did not. Instead, it adopted broader protections and required them to
be liberally interpreted. Even without a liberal interpretation, those protections
apply to more than the amount of water available for diversion.
The phrase “adversely affected” is used in other provisions of the WUA. For
example, “[a] person has standing to file an objection under this section if the
property, water rights, or interests of the objector would be adversely affected by the
4 Another provision of the WUA provides that mitigation may be used where “net
depletion” causes an adverse effect. See § 85-2-360, MCA. The statute does not
say net depletion is the only cause of adverse effect.
CITY OF BOZEMAN'S OPENING BRIEF | 22
proposed appropriation.” § 85-2-308(3), MCA. Obviously, “Water right” does
not equal “property,” does not equal “interest.” Just as “water right” used in § 85-
2-402(2)(a), MCA, does not mean “other perfected or planned uses or
developments.” Zinvest supra. This Court holds,
It is an elementary rule of construction that every word, phrase, and
term of a statute shall be considered, and none shall be held to be
meaningless if it is possible to give it effect.
State v. Dist. Court of Fourth Judicial Dist., in & for Ravalli Cty., 51 Mont. 305, 152
P. 745, 746 (1915) citing Stadler v. City of Helena, 46 Mont. 128, 127 Pac. 454.
Relying on authority that does not look at “planned uses” and predates
adoption of the WUA by decades, DNRC argued in this case that “[t]he adverse
effect test is thus a legal concept that protects only discrete interests in water held by
appropriators” meaning volume flow rate and timing of water in a source.5
Respondent DNRC’s Response to Petitioners Opening [District Court] Brief at 10.
Even without the required liberal interpretation, that is not what the WUA says. It
says applicants must show “water rights,” among other things, will not be adversely
affected. It says persons with “water rights” that are adversely affected may object.
5 DNRC adopted a standing rule that reflects the legislative intent to protect more
than discrete elements of a water right. Under that rule “To have standing, a person
must have property, water rights, or other interests that would be adversely affected
were the application to be granted.” ARM 36.12.117(9)(g). The objection form
prepared and approved by DNRC reflects the agency’s understanding that the law
protects more than water rights. It says a person has standing if his or her property,
water rights or interests would be adversely affected.” AR 166, No. 3
CITY OF BOZEMAN'S OPENING BRIEF | 23
Place of Use is an element of a water right. See Curry v. Pondera Cty. Canal &
Reservoir Co., 383 Mont. 93, 109, 370 P.3d 440, 451 (2016) ("where water is put to
use is an element of a water right.").
The City objected because Utility Solutions' Application will adversely affect
the City’s planned place of use. Under the reasoning adopted by DNRC (and the
district court), protection against adversely effecting “water rights” is amended to
protect only “discrete elements of a water right.” The insertion of omitted terms is
not allowed. § 1-2-101, MCA. Moreover, under the district court (and DNRC’s)
interpretation, plainly stated statutory protections against adversely affecting
“property” or “interests” or “planned uses” or “developments” are rendered
meaningless, which also is not allowed. Stadler supra. Utility Solutions did not
comply with the change statute by showing that its Application will not adversely
affect the City’s planned use of water. The Application should be denied.
3. DNRC and the District Court Rely on Authorities that Do
Not Apply to the Issue of First Impression Concerning
Statutory Protections for a City’s Planned Municipal Uses of
Water.
Authorities cited by DNRC (and the district court) confirm that applications
which diminish the amount of water available to other water users can result in
adverse effect, where the other user cannot reasonably exercise a water right. § 85-
2-401, MCA. But this is a case of first impression that and none of those authorities
CITY OF BOZEMAN'S OPENING BRIEF | 24
deal with planned uses and none say that diminishing a water source is the only way
to adversely affect a water right (or planned use, or development, or water quality,
or discharge permit, or property, or other interest, all of which the WUA protects
from adverse effect). For example, ARM 36.12.1903(2) which deals with adverse
effect of change applications lists factors that do not address planned uses and are
not exclusive; the regulation says “including, but not limited to, the following.”
In the change statute, the legislature enacted language that protects planned
uses for which a water right has been issued. It is self-evident that a person planning
to use water cannot reasonably do so if another person is subsequently granted the
right to use the same place of use for the same purpose. In most instances the
question does not arise because the property owner holds the possessory interest in
the planned POU. Municipalities do not own the POU. That is why DNRC’s
published municipal water right guidance looks at a “growth policy adopted under
MCA 76-1-601 for purposes of possessory interest in the Place of Use.” AR 286
(Heaston Aff., Ex. 13).
The district court reasoned, incorrectly, that the “City’s interpretation of the
statutes would expand the definition of interests protected by law.” District Court
Order at 11. Though, as the district court rightly points out, the interests protected
from adverse effect are expressly enumerated, yet the court interprets the statute to
give those interests no meaning. Respectfully, “planned uses” of water is among
CITY OF BOZEMAN'S OPENING BRIEF | 25
the enumerated interests protected from adverse effect. No authority cited by the
district court (or DNRC) gives any effect to protection for planned uses of water.
Giving effect to existing statutory protections does not expand the interests protected
by law.
Utility Solutions argued in briefing to the district court that “planned uses”
refers to an inchoate (or unperfected) uses of water. See AR 295. This argument
ignores the fact that the statute prohibits changes from adversely affecting “other
perfected or planned uses or developments for which a permit or certificate has been
issued or for which a state water reservation has been issued. § 85-2-402(2)(a),
MCA. Certificates are not inchoate, so protection of planned uses must include
more than inchoate rights. Regardless, as Utility Solutions took pains to explain at
hearing, inchoate water users are protected from adverse effect by subsequent
applications because it can be time consuming and expensive for water users to build
infrastructure needed to perfect a planned use. Hearing Transcript, 44:18-25.
Utility Solutions further explained that inchoate rights, “tell me how much [i.e.,
volume, flow rate], where my place of use is, where my point of diversion (sic), and
its my job to make it happen. Those are planned uses.” Id, at 45:19-22 (emphasis
supplied).
The City could not agree more. “Planned uses” necessarily include a place of
use. The City also agrees that diligent development of a municipal utility is time
CITY OF BOZEMAN'S OPENING BRIEF | 26
consuming and expensive—in the case of growing communities some might even
say never ending. See Town of Manhattan v. Dep't of Nat. Res. & Conservation of
State, 364 Mont. 450, 451, 276 P.3d 920, 921 (2012) (arguing unsuccessfully that
information requested by DNRC was irrelevant “because the Town's water rights
included the right to expand water use as needed for continued municipal growth.”).
It takes years to plan for, finance and construct municipal water systems to
meet growing demands. Apparently, Utility Solutions believes the WUA protects
its ability to perfect an inchoate use of water but not the City. Regardless, the City
has planned use of water in accordance with statutory requirements, adopting growth
policies in 2001 and 2009 and subsequent updates to its water facility plan.
Statement of Fact, No. 1. The City is asking for nothing more than the same
protection afforded to all other water users so the time and expense to diligently
perfect the planned use is not lost, to a subsequent change application. In this case,
one filed by a private entity with a profit motive.
This is a case of first impression regarding protection of planned municipal
use. Naturally, the authorities relied on by DNRC and the district court do not
address the issue. Those authorities are also distinguishable based on recognized
differences between municipalities and other water users. Place of use is an
element of a water right. Curry supra. In all cases, before an applicant can use
water beneficially, he or she must have the possessory interest, or written consent of
CITY OF BOZEMAN'S OPENING BRIEF | 27
the person with the Possessory Interest, in the property where water is to be put to
beneficial use. See e.g., § 85-2-402(2)(d), MCA. Municipalities do not maintain
direct ownership of the Place of Use. AR 286 (Heaston Aff., Ex. 13 – DNRC,
Guidance for Municipal Purposes & Water Rights).
DNRC denied the City’s objection on the grounds that Places of Use can
overlap. AR 9. But that is not dispositive. For an Application to be approved, a
person must have the possessory interest in the POU. According to DNRC’s
Guidance for Municipal Water Rights, “[w]hen reviewing water right applications
the Department is able to look at a properly adopted growth policy under § 76-1-
601, MCA, for purposes of possessory interest in the Place of Use." AR 286.
DNRC must be presumed to know the meaning of ‘possessory interest’ as a term-
of-art in the law of prior appropriation. DNRC did not look at the City’s Growth
Policy and found instead that Utility Solutions (which has no growth policy) has the
possessory interest because ultimate users will not accept the supply without
consenting. AR 25 (FOF 14). Before the Application was accepted, the City
established the possessory interest and acquired a legal right to use water beneficially
under rights issued to meet future demand in the Disputed Area (shown in the
following section).
The district court concluded erroneously that protection of property or
interests under § 85-2-308(3), MCA, must give way to enumerated protections in
CITY OF BOZEMAN'S OPENING BRIEF | 28
§ 85-2-402(2)(a), MCA. But this is a case of first impression. The fact that no
reported case affords protection to “planned uses” does not mean planned uses are
not protected. This Court directs that all statutory language be given effect if
possible. Stadler supra. The City is entitled to object if its possessory interest is
adversely affected under § 85-2-308(3), MCA. That interest, recognized by DNRC
based upon adoption of a Growth Policy, evidences the City’s planned use of water.
The City’s planned use is protected from adverse effect under the change statute.
Protecting the City’s planned use from adverse effect protects the City’s possessory
interest. Unlike the narrow interpretation of DNRC, and the district court, the
City’s appropriately liberal interpretation gives meaning to all statutory language.
Utility Solutions did not make the required showing that its Application will not
adversely affect the City’s planned use of water. The Application should be denied.
4. The City has a Legal Right to Use Water to Meet Municipal
Demand in the Disputed Area Under a Purchase Contract
with DNRC for Shares in Water Rights that DNRC Issued to
DNRC for that Purpose.
The DNRC ruled that no water rights were issued for the City’s planned use.
The district court disposed of the petition based on its interpretation of adverse effect
and did not address the City’s interest in water. Contrary to the agency’s puzzling
conclusion, the record shows that the City’s planned use of water is based on water
rights issued expressly for the purpose of meeting municipal demand.
CITY OF BOZEMAN'S OPENING BRIEF | 29
DNRC issued Reservation 70118-41H, to meet “future demands by municipal
users.” AR 273 (Finding of Fact A.3. – so stating). The City holds that reservation
for future use. DNRC’s Reservation Order states:
if the contract for Hyalite reservoir expansion water supply (expected
to provide the city with a reliable supply of 2,248 af/year) is entered in
to, the City of Bozeman reservation need will be reduced by the reliable
reservoir expansion amount to an expected need of 609 af/year of water.
AR 0279 (Heaston Aff., Ex 10).
DNRC issued Provisional Permit 41H 58294 00 when the volume of Hyalite
Reservoir was expanded to 10,184 acre-feet. AR 0258 (remark so stating). As
shown, the volume of water authorized for storage under the provisional permit was
contemplated in and tied directly to the City’s reservation.
The expansion of Hyalite is reflected in the Water Purchase Contract, signed
by DNRC, granting the City a right to use of 5,712 of the 10,184 ac-ft stored in
Hyalite (the same volume stated in the provisional permit). AR 0247 (Heaston
Aff., Ex. 6). After the expansion contract was signed, DNRC reduced the volume
of water set aside for future municipal use in Reservation 70118-41H to 609 ac-ft.
See AR 0246 (Heaston Aff., Ex. 5). Clearly, Provisional Permit 41H 58294 00 was
issued (by DNRC to DNRC) to meet the City's future municipal demand. AR 231
(Heaston Aff., ¶ 12; AR 0255-258 (Heaston Aff., Ex. 7).
CITY OF BOZEMAN'S OPENING BRIEF | 30
Pursuant to the City's Contract with DNRC, the City has a legal right to use
water under the Provisional Permit and Claim 41H 119496 00 to meet future needs.
AR 231 (Heaston Aff. ¶ 12). The Hearing Examiner expressly found that the City’s
interest in DNRC’s provisional permit (and Claim 41H 119496 00) legally entitles
the City to deliver municipal water in the Disputed Area. AR 0005-6 (Final Order
at 4-5); see also AR 0253-0258 (Heaston Aff., Ex 7).
To summarize, DNRC issued a reservation for Bozeman’s future demand,
then reduced the reserved volume after contracting with the City to use Hyalite water
for municipal purposes. DNRC expressly found that the City has legal right to use
its contract rights in the Disputed Area. Yet somehow DNRC concluded that no
water right has been issued for the City’s planned use.
The finding/conclusion that no water right was “issued” for the City’s planned
use is clearly erroneous, being unsupported by substantial evidence, and legally
incorrect, being that the stated rights were clearly “issued” to provide water for
future municipal use. The City’s right to use water in the Disputed Area is a
protected “interest” within the meaning of § 85-2-308(3), MCA. Together with
adoption of the Growth Policy, and resulting possessory interest, the City’s
acquisition of contract rights to meet future municipal demand in the Disputed Area,
establish a “planned use” of water protected under § 85-2-402(2)(a), MCA. Utility
CITY OF BOZEMAN'S OPENING BRIEF | 31
Solutions' failure to show that the City’s planned use of water will not be adversely
affected is grounds for denial of its Application.
C. DNRC’s Impermissibly Narrow Interpretation of the Change
Statute Undermines the Important Value of Tying Future
Municipal Water Use to Sound Public Planning.
The Court is not being asked to make new law, it is being asked to interpret
statutory language that has not been applied in any reported case. Contrary to
positions previously taken by the other parties, the City’s interpretation is entirely
consistent with the doctrine of prior appropriation as codified in the WUA. Indeed,
Montana is not the only prior appropriation state that connects municipal water rights
to public planning. In Idaho, cities’ place of use lies “within the municipality's
established planning area if the constructed delivery system for the area shares a
common water distribution system with lands located within the corporate limits.”
Idaho Code, Section 42-202B. Under Washington law, the place of use is "the area
designated in a water system plan or a coordinated water system plan pursuant to
chapter 43.20 or 70.116 RCW respectively.” RCW 90.03.383(2)(b)
Idaho and Washington both distinguish between municipal utilities that are
required to plan (like the City) and entities that provide municipal service but are not
required to plan (like Utility Solutions). Idaho law states "For a municipal provider
that is not a municipality, the service area shall correspond to the area that it is
authorized or obligated to serve, including changes therein after the permit or
CITY OF BOZEMAN'S OPENING BRIEF | 32
license is issued." Idaho Code, Section 42-202B. Washington law states "When
a public water system does not have a designated service area subject to the approval
process of [planning requirements], the service area shall be the designated place of
use contained in the water right permit or certificate." RCW 90.03.383(2)(b).
Utility Solutions is not required to plan. DNRC found that its service area is
the place of use for its water rights. AR 23 (FOF 10). The City is required to plan.
Both Utility Solutions and DRNC recognized the City’s service area as the growth
policy planning boundary. In addition to recognizing that an adopted growth policy
satisfies the possessory interest requirement, DNRC’s published municipal guidance
states “[t]he Department will consider the Place of Use to be the maximum extent of
the existing municipal boundary or the maximum extent of the boundary as defined
in the properly adopted growth policy.” AR 286 (emphasis supplied). Thus, the
statutory relationship between municipal water rights and municipal planning in
Montana mirrors nearby state codes consistent with the prior appropriation doctrine.
Beyond the plain language, statutory structure and the legislative directive
requiring liberal construction of the WUA, sound policy considerations favor
construing § 85-2-402(2)(a), MCA, to prevent change applications from adversely
affecting planned uses of water needed to meet future municipal demand.
Montana’s population is growing. Bozeman in particular is growing. The
challenge in planning to meet the City’s growing demand for water is magnified by
CITY OF BOZEMAN'S OPENING BRIEF | 33
its location in the upper reaches of a basin that is legislatively closed to new
appropriations. § 85-2-343, MCA. The Upper Missouri is not the only closed
basin in the state and others are likely to be closed in the future. Knowing that
planned uses often takes years to perfect it makes perfect sense for the legislature to
provide protection from being adversely affected by those changes. That policy is
reflected in DNRC’s guidance for municipal water rights, which directly links a
city’s possessory interest in a planned place of use to the adoption of a growth policy
under § 76-1-601, MCA, et seq.
Interpreting the statute narrowly not only violates the express legislative
directive for liberal construction, in this case it will allows a private company to
profit from publicly funded planning at the public’s expense. If this change is
approved, the public will be deprived of the benefit of sound planning that it paid
for and will be forced to pay additional costs. The City already designed and
planned water mains needed to serve future development in the Disputed Area. AR
245 (map showing planned location of water mains). If Utility Solutions' Change
Application is granted the City will have to do it over. Allowing Utility Solutions
to deliver water in the City's Planning Area will not only reduce the City's ability to
use its water rights beneficially, it will take customers (revenue) away from the City
and increase capital and O&M costs. Heaston Aff., ¶ 15.
CITY OF BOZEMAN'S OPENING BRIEF | 34
The City established and adopted a growth policy and water facility plan to
facilitate urban development of more than 2,600 acres adjacent to Utility Solutions’
existing place of use. After filing a sworn Application shown to be incorrect, Utility
Solutions is now seeking to take advantage of its error, stating plainly that it "does
not care" about Bozeman's plans. Utility Solutions' position is not surprising, it
exists to generate a profit. DNRC’s support of that position is surprising.
DNRC published a municipal guidance that recognizes the link between
municipal planning and water use. DNRC issued water rights to itself to meet
future municipal demand. DNRC contracted with the City so future demand could
be planned for and met. DNRC agrees the City’s interest in those rights can be used
for municipal purposes in the Disputed Area. AR 5-6. Yet, DNRC reached the
puzzling conclusion that “[t]he City has not pointed to any permit, certificate or
reservation that has been issued that contemplates municipal use within the Disputed
Area.” AR 7. Then, at hearing DNRC argued Bozeman can do “what other
municipalities have done is (sic) if they can prove that they' re entitled to it, they can
enter into condemnation proceedings.” Hearing Transcript at 37:2-6. Under these
facts, it is inconceivable that an agency of the state is propounding a statutory
interpretation that favors condemnation over sound public planning. The court
should reject the DNRC’s interpretation, reverse the district court and deny Utility
Solutions’ inaccurate Application.
CITY OF BOZEMAN'S OPENING BRIEF | 35
VII. CONCLUSION
For the reasons given, the City respectfully requests that the Court reverse
district court’s decision and order DNRC to deny Change Application 41H
30110660. Alternatively, the City requests an order modifying DNRC’s Final
Order by removing property within the City’s growth policy and its 2017 water
facility plan update boundary, from the Utility Solutions' approved place of use.
Dated this 10th day of January, 2020.
PETER G. SCOTT, LAW OFFICES, PLLC
/s/ Peter G. Scott
Peter G. Scott, Attorney for City of Bozeman
CERTIFICATE OF COMPLIANCE
Pursuant to Rule 11, Montana Rules of Civil Procedure, Appellant certifies
that this brief is printed with proportionately spaced Times New Roman text
typeface of 14 points, is double-spaced except for footnotes and intended quotes.
This brief contains 8642 words, as calculated by Microsoft Office Word 2016,
excluding the cover, Table of Contents, Table of Authorities, Certificate of
Compliance and Certificate of Service.
CITY OF BOZEMAN'S OPENING BRIEF | 36
DATED this 10th day of January, 2020.
PETER G. SCOTT, LAW OFFICES, PLLC
/s/ Peter G. Scott
Peter G. Scott, Attorney for City of Bozeman
CERTIFICATE OF SERVICE
This certifies that a true and correct copy of the foregoing was served upon all
parties listed below as stated and via United States First Class Mail, Postage Prepaid,
on this 10th day of January, 2020.
Barbara Chillcott
Cameron Boster
Special Assistant Attorneys General
Montana Department of Natural
Resources and Conservation
1539 Eleventh Avenue
PO Box 201601
Helena, MT 59620-1601
(406) 444-3776
Barbara.chillcott@mt.gov
Cameron.boster@mt.gov
Attorneys for DNRC
Matthew W. Williams
Williams & Jent, PLLP
506 E. Babcock
Bozeman, MT 59715
(406) 586-1373
(406) 586-4548 (fax)
Mattheww53@aol.com
Attorney for Utility Solutions, LLC
City of Bozeman
c/o Tim Cooper, Attorney
PO Box 1230
Bozeman, MT 59771-1230
(406) 582-3200
Electronically signed by Diana Tyrrell on behalf of Peter G. Scott
Dated 01/10/2020