HomeMy WebLinkAboutBozeman v Utility Solutions D Crt Opinion rALLATIU COUyTY CtER?,
OF DIS1 RICI COURT
2019 NOV --6 AM -a0--20
FILED
BY DEPUI Y
MONTANA EIGHTEENTH JUDICIAL DISTRICT COURT, GALLATIN COUNTY
CITY OF BOZEMAN,
Petitioner, Cause No. DV-18-1323B
vs. Hon. Rienne H. McElyea
MONTANA DEPARTMENT OF
NATURAL RESOURCES AND ORDER ON PETITION FOR
CONSERVATION, an agency of the State of JUDICIAL REVIEW
Montana, and UTILITY SOLUTIONS, LLC,
Respondents.
This matter comes before the Court on the City of Bozeman's Petition for Judicial
Review. The City of Bozeman ("City") is seeking reversal of the Montana Department of
Natural Resources and Conservation's ("DNRC") Final Order on Motions for Summary
Judgment in the Matter of Change Application No. 411-1-30110660 (the "Final Order").
The Final Order granted Utility Solutions, LLC's ("Utility Solutions") Application to
Change Water Right No. 41H 3010660 (the "Change Application") and denied the City's
Motion for Summary Judgment.
This Court held a hearing on August 8, 2019. Peter G. Scott was present
representing the City. Special Assistant Attorneys General, Barbara Chillcott and Cameron
S.. Boster appeared on behalf of DNRC. Matthew W. Williams appeared on behalf of
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Utility Solutions. Upon due consideration of the briefs and argument of counsel, the
administrative record filed with the Court, together with the applicable law, the Court
determines that the DNRC's Final Order is AFFIRMED.
BACKGROUND
Utility Solutions owns Beneficial Water Use Permit No. 41H 30046241 (the
"Provisional Permit"), an unperfected permit. The Provisional Permit authorizes Utility
Solutions to appropriate and provide 1,140.68 acre-feet of water per year for municipal
purposes in a designated place of use in the Four Corners area west of Bozeman in Gallatin
County, Montana. AR 2 / 0014-0016. On March 27, 2017, Utility Solutions filed the
Change Application with the DNRC for authorization to change the place of use for its
Provisional Permit. In the Change Application, Utility Solutions claimed:
[t]here are many properties currently located in gaps between the current
place of use for [the Provisional Permit] and the City of Belgrade, City of
Bozeman and the Rae County Water and Sewer District service areas. The
purpose of the proposed change is to extend the Place of Use of [the
Provisional Permit] to provide these properties with the ability to.either
connect to the existing Four Corners County Water and Sewer District or to
provide their own public water system utilizing [the Provisional Permit].
AR 4/0055.
On January 19, 2018, the DNRC regional office issued the Preliminary
Determination to Grant Change (the "PD"), preliminarily determining Utility Solutions
met the statutory criteria for the change requested in its Change Application. AR 2/0013-
0034. Notice of the PD was provided pursuant to § 85-2-307(2), MCA. On April 13, 2018,
the City filed an objection to the Change Application pursuant to § 85-2-308, MCA. AR
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17 / 0166-0177. On May 17, 2018, the DNRC appointed a hearing examiner to preside on
the City's Objection. AR 39 /0317-0321.
The City's most recent growth policy, the Bozeman Community Plan, was adopted
in 2009 pursuant to § 76-1-101, MCA (the "Growth Policy"). AR 31 / 230. The City
completed a water facility plan update (the "2017 Water Facility Plan") in July 2017. The
update occurred several months after Utility Solutions filed the Change Application. AR
31 / 231. The 2017 Water Facility Plan expanded on the Growth Policy's planning area
boundary by adding lands northwest of the City limits to the City's water facility planning
area. AR 31 / 231. The City is in the process of updating its Growth Policy to mirror the
boundaries of the 2017 Water Facility Plan. Id,
The City refers to the area covered by the 2017 Water Facility Plan as its "Service
Area." Utility Solutions seeks authorization from the DNRC to expand its place of use into
a portion of the area added to the City's water facility planning area by the 2017 Water
Facility PIan, referred to as "the Disputed Area." AR 1 / 0002. This would result in a
2,600-acre overlap between the City's 2017 Water Facility Plan boundary and the
authorized place of use for Utility Solutions' Provisional Permit.
The City and Utility Solutions filed cross motions for summary judgment on
September 7, 2018. The hearing examiner concluded the Change Application "that results
in the geographic overlap of the place of use with the City of Bozeman's Growth Policy
and Water Facility Plan does not result in adverse effect as contemplated under § 85-2-
402(2)(a)." AR 1 / 0009. The DNRC hearing examiner granted the Change Application.
Id.
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STANDARD OF REVIEW
Pursuant to MAPA, a court's review must be confined to the record. § 2-4-704(1),
MCA. A court may only reverse or modify an agency's decision "if substantial rights of
the appellant have been prejudiced" because the . agency's "findings, inferences,
conclusions, or-decisions" were:
(a) (i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of law;
(v) clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record;
(vi) arbitrary or capricious or characterized by abuse of discretion
or clearly unwarranted exercise of discretion; or
(b) findings of fact,,upon issues essential to the decision, were not made
although requested.
§ 2-4-704(2), MCA.
A decision is "arbitrary and capricious" only where it appears to be "random,
unreasonable or seemingly unmotivated, based on the existing record" not simply a
difference of opinion. Silva v. City of Columbia Falls, 258 Mont. 329, 335, 852 P.2d 671,
675 (1993).
The reviewing court considers a petition for judicial review from a fin a[ agency
action on summary judgment de novo, pursuant to Rule 56, Mont. R. Civ. P. Roe v. City
of Missoula, 2009 MT 417, ¶ 14, 354 Mont. 1, 22I P.3d 1200. Summary judgment should
be granted "if the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and the movant is
entitled to judgment as a matter of law."Rule 56(c)(3), Mont. R. Civ. P.
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An agency's interpretation of statute should be upheld where it is reasonable and
best effectuates the statute's purpose. Baitis v. Dep't. of Revenue, 2004 MT 17, 1122-24,
319 Mont.292, 83 P.3d 1278. Ordinarily, courts give deference to a statutory interpretation
advanced by the agency charged with administering the statute. U.S West, Inc. v. Dept. of
Revenue, 2008 MT 125, 119, 343 Mont. 1, 183 P.3d 16.
Statutory construction is a holistic endeavor that must account for the whole of the
statute's text and structure. DEQ v. BNSF Ry, Co., 2010 MT 267, ¶ 56, 358 Mont. 368,
246 P.3d 1037. A reviewing court must construe the law as it finds it and ascertain what
is in the terms or substance contained therein, not to insert was has been omitted, or omit
what has been inserted. It must avoid any interpretation that renders any section of a statute
superfluous and that does not give effect to all of the words used. Montana Trout Unlimited
v. DNRC, 2006 MT 72, ¶ 23, 331 Mont. 483, 133 P.3d 224; Baitis, ¶¶ 22-24; §§ 1-2-101
through 1-2-107, MCA. Additionally, where an agency's interpretation of a statute has
stood unchallenged for a considerable length of time, it will be regarded with great
importance in arriving in the proper interpretation. Glendive Medical Center v. Mont. Dept.
of Public Health and Human Services, 2002 MT 131, 114, 310 Mont. 156, 49 P.3d 560.
DISCUSSION
The City contends the expansion in the place of use for Utility Solutions'
Provisional Permit will adversely affect the City's planned use for providing municipal
water to the same area. The City asserts its 2017 Water Facility Plan is a "planned use"
protected from adverse effect by § 85-2-402(2)(a), MCA. Respondents, Utility Solutions
and the DNRC, argue: (1) the City's formal plans to use water in the Disputed Area is not
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an interest protected by the Montana Water Use Act's ("MWUA") prohibition against
adverse effect; and (2) the City holds no permit, certificate, or water reservation (or
interests in the same) which were issued for its planned use or development of water in the
Disputed Area. The City contends the PD contained the following incorrect factual
finding: "The intent of the proposed expansion of[Utility Solutions'] service area is to fill
gaps between the current place of use and the service areas of neighboring utility
providers." Respondents counter the finding was not essential to the decision.
An appropriator must seek DNRC authorization prior to changing a water right. §
85-2-402, MCA. A change in a water right means a change to certain elements of a water
right, "the place of diversion, the place of use, the purpose of use, or the place of storage."
§ 85-2-101(6)(a), MCA. To change a water right, an applicant must comply with the
statutory change criteria set forth in the MWUA. If an applicant proves the criteria set
forth in § 85-2-402(2), MCA by a preponderance of the evidence, the DNRC "shall"
approve the change requested.
The MWUA is based on the long-standing doctrine of prior appropriation. Kelly v.
Teton Prairie, LLC, 2016 MT 179, ¶ 11, 384 Mont. 174, 376 P.3d 143; Mont. Code Ann.
§ 85-2-401(1) ("As between appropriators, the first in time is the first in right"). Sections
85-2-401(1) and 85-2-402(2)(a), MCA codify the prior appropriation principles set forth
in over a century of case law that(1) Montana appropriators have a vested right to maintain
surface and ground water conditions substantially as they existed at the time of their
appropriation; (2) subsequent appropriators may insist that prior appropriators confine their
use to what was actually appropriated or necessary for their originally intended purpose of
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use; and (3) an appropriator may not change or alter its use in a manner that adversely
affects another water user. See Spokane Ranch & Water Co. v. Beatty, 37 Mont. 342, 96
P. 727, 73-1 (1908); Quigley v. McIntosh, 110 Mont. 495, 505 103 P.2d 1067, 1072-74
(1940).'
Utility Solutions applied to DNRC to change the place of use of its Provisional
Permit. The only change criterion raised by the City which was at issue before the DNRC
hearing examiner was whether Utility Solutions proved by a preponderance of the evidence
that:
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 [Title 85, Chapter 2]
part 3. .
§ 85-2-402(2)(a), MCA.
The terms "adversely affect" and "adverse effect" are not defined in the MWUA.
However, "adversely affect" can be examined from the plain reading of the MWUA and
review of a long-developed case law.
The MWUA requires an applicant for both a new beneficial water use permit and a
change to an existing water right to prove by a preponderance of the evidence that the new
1 See also Holmstrom Land Co. Inc. Y. Newlan Creek Water District, 185 Mont.409,605 P.2d 1060(1979);
Lokowich v. Helena,46 Mont.575, 129 P. 1063(1913); Thompson v. Harvey, 164 Mont. 133, 519 P2d 963(1974)
(plaintiff could not change his diversion to a point upstream of the defendants because of the injury resulting to the
defendants);McIntosh v. Gravelev, 159 Mont,72,495 P.2d 186 (1972)(appropriator was entitled to move his point
of diversion downstream,so long as he installed measuring devices to ensure that he took no more than would have
been available at his original point of diversion); Head v. Nate,38 Mont. 302, 100 P.222(1909)(successors of the
appropriator of water appropriated for placer mining purposes cannot so change its use as to deprive lower
appropriators of their rights,already acquired, in the use of it for irrigating purposes); and,Gassert v. Noyes. 18
Mont.216,44 P. 959(1896)(change in place of use was unlawful where reduced the amount of water in the source
of supply available which was subject to plaintiffs' subsequent right).
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appropriation or change in appropriation will not adversely affect certain interests of other
appropriators. §§ 85-2-311(1)(b); 85-2-402(2)(a), MCA. Whether adverse effect exists
turns on "the legal proposition that each subsequent appropriator is entitled to have the
water flow in the same manner as when he located, and that he may insist that prior
appropriators shall be confined to what was actually appropriated or necessary for the
purposes for which they intended to use the water." Spokane Ranch, 96 P. at 731. Pursuant
to § 85-2-40l(1), MCA, "[p]riority of appropriation does not include the right to prevent
changes by later appropriators in the condition of water occurrence, such as the increase or
decrease of streamflow or the lowering of a water table, artesian pressure, or water level,
if the prior appropriator can reasonably exercise the water right under the changed
conditions." The Montana Supreme Court found,
The fundamental underlying precept of the [prior appropriation] doctrine is
timing—wherein he who first acquires a right to water is entitled to his full
appropriation (limited by needs and facilities) before subsequent right
holders may maximize their rights . . . If a senior appropriator found he was
not receiving his full appropriation under the doctrine he was allowed some
measure of self-help in the form of making a call upon a junior appropriator
to cease diversions until the senior's appropriation was maximized.
Kelly, ¶ I l (internal citations committed).
The statutory requirements for a change in a water right require an applicant to prove
by a preponderance of evidence that four specific categories of interests of appropriators
will not be adversely affected. These categories are found within § 85-2-402, MCA. 1.)
"[T]he use of existing water rights of other persons,"(§ 85-2-402(2)(a),MCA);2.)"[O]ther
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," (Id.); 3.) "The water quality of an
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appropriator," § 85-2-402(2)(0, MCA; and 4.) "The ability of a discharge permitholder to
satisfy effluent limitations of a permit issued in accordance with Title 75, chapter 5, part
4," § 85-2-402(2)(g), MCA. The criteria in § 85-2-402(2)(f) and (g), MCA are required to
be met only if a valid objection is filed. These criteria are not at issue in this matter.
Similarly, the statutory criteria for new permits require an applicant to prove no
adverse effect to the same specified interests set forth in the change statute. See, § 85-2-
31 i(1)(b), (f), and (g), MCA. The test for a new beneficial water use permit requires that
"adverse effect must be determined based on a consideration bf the applicant's plan for the
exercise of the permit that demonstrates the applicant's use of the water will be controlled
so the water right of a prior appropriator will be satisfied." § 85-2-311(1)(b), MCA. For
a new groundwater appropriation in a basin closed to new surface water appropriations,the
DNRC must determine whether the new appropriation will result in a net depletion to
surface water. With regard to the adverse effect test, "[a] determination of whether or not
there is an adverse effect on a prior appropriator as a result of a new appropriation right is
a determination that must be made by the [DNRC] based on the rate, location, and timing
of the net depletion that causes the adverse effect relative to the historic beneficial use of
the appropriation right that may be adversely affected." § 85-2-360(3)(a), MCA.
Regarding the adverse effect analysis for water right change applications, the
DNRC's administrative rules provide:
(1) Lack of adverse effect for change applications is generally based on the
applicant's plan showing the diversion and use of water and operation of the
proposed project.will not exceed historic use, and can be implemented and
properly regulated. A written narrative must be provided addressing the
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applicant's plan to prevent potential adverse effects to existing water rights,
certificates, permits, and water reservations.
(2) The applicant's plan must document the effects to the other water rights
including, but not limited to, the following:
(a) water rights using the existing or proposed point of diversion;
(b) other ditch users;
(c) down-slope water users;
(d) the effect to water rights dependent on the return flow;
(e) the effects of changing the historic diversion pattern including rate and
timing of depletions;
(f) for groundwater applications, the applicant shall explain how the changed
water right will affect water levels in wells of junior and senior water rights
and the rate and timing of depletions from hydraulically connected surface
waters, and what effect those changes will have on those water rights within
the notice area.
Mont. Admin. R. 36.12.1903.
The DNRC's "Guidance for Municipal Purposes & Water Rights" provides the
following direction regarding the adverse effect analysis:
When changing the place of use for a municipal use water right, like all water
users, the applicant must prove that the proposed change in use will not cause
adverse effect pursuant to 85-2-402, MCA. ARM 36.12.1903 sets forth the
specific requirements for proof of no adverse effect which include a
comparative analysis of historical use and use under the proposed change
along with an analysis of the potential effect on any water rights dependent
upon historic return flows. When changing or adding to the place of use for
a municipal use water right, an applicant will need to be able to prove that
the change in use will not expand the historic diverted volume, diverted
flow rate, or consumed volume. Any increase in these elements of the
underlying water right may adversely affect other water users and
constitute a new use that requires a beneficial water use permit . . .
Quantifying for example how the proposed change in place of use will not
create an enlargement of the existing right can be a difficult task when
municipally purposed water rights are being changed particularly with regard
to being able to show that the consumptive use of the right through the change
will not be enlarged by adding or changing an additional place of use. In
other words the full extent of the water right (flow rates, diverted volume,
and consumptive volume) must be effectively quantified both historically
and through the proposed change of use. (emphasis added)
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The adverse effect test in the MWUA is meant to ensure water right holders can
continue to reasonably exercise their water rights with the same amount of water being
available to them at the same rate, at the same timing, at the same location.
The City asserts it is a water right holder as contemplated by statute. The City
contends the reference in § 85-2-402(2)(a), MCA to "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," read in conjunction with the MWUA's language regarding
standing for filing objections based upon "other interests . . . adversely affected by the
proposed appropriation," protect its planning efforts from infringement by Utility
Solutions' Change Application. §§ 85-2-308(3) and — 402(2)(a), MCA. The City also
argues that, based on its interpretation of a DNRC guidance document for municipal
purposes and water rights (AR 31 / 0283-0289), it holds "possessory interest" over the
Disputed Area, as contemplated by § 85-2-402(2)(d), MCA. The City contends this
"possessory interest" is an "other interest" that will be adversely affected by the Change
Application.
The Court finds the City's argument unpersuasive. The City's interpretation of the
statutes would expand the definition of interests protected by the law. The MWUA does
not require a change applicant to prove lack of adverse effect for interests outside of the
categories of interests enumerated in § 85-2-402(2)MCA.
While the MIVUA's language for standing to file an objection to a water right
application includes "other interests" that may be adversely affected, that statute must be
read in conjunction with the change statute, which explicitly enumerates the types of
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interests protected from adverse effect from a change in appropriation right. Even if the
City could demonstrate that it has planned uses for which a permit, a certificate, or a water
reservation has been issued (a point of disagreement between Respondents and the City),
or possessory interest in the Disputed Area, it cannot demonstrate that the protections
afforded by the MWUA extend to prevent another water utility from securing an authorized
place of use or service area that overlaps with the City's Service Area.
The City concedes that the proposed change will not reduce or otherwise impact
the quantity of water available to the City for any of its existing water rights. Thus, even
if one assumes that that the proposed change will interfere with: (1) "the City's plan to
deliver municipal water to more than 2,600 acres located in the City's Service Area" or
(2) the "orderly and efficient development of publicly owned and maintained
infrastructure by hampering the City's ability to obtain easements at fair market value
and increasing capital and O&M costs" as argued by the City, this does not constitute an
adverse effect under the change provisions of the MWUA.
"In the construction of a statute, the office of the judge is simply to ascertain and
declare what is in terms or substance contained therein,not to insert what has been omitted
or to omit what has been inserted. Where there are several provisions or particulars, such
a construction is, if possible, to be adopted as will give effect to all." § 1-2-101, MCA.
The Court must construe the change statute by "reading and interpreting the statute as a
whole, `without isolating specific terms from the context in which they are used by the
Legislature."' State v. Triplett, 2008 MT 360, ¶ 25, 346 Mont. 383, 195 P3d 819 (citing
Mont. Sports Shooting Assn v. State, 2008 MT 190, 111, 344 Mont. 1, 185 P.3d 1003).
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The MWUA does not protect the City's formal plans to use water. The adverse effect
under the MWUA cannot result solely from the authorization of a place of use for Utility
Solutions' Provisional Permit that overlaps with the City's Growth Policy and 2017 Water
Facility Plan boundary. Where, as here, there is no allegation that the amount of water
available to the City for use pursuant to any of its water rights or interests in water rights
will be diminished, the Court cannot conclude that the Final Order was issued in error.
This Court is unable to extend the protections in the MWUA to the City's formal plans to
use water in the Disputed Area.
The Court finds that the City's assignment of error to the PD's Finding of Fact No.
10 ("The intent of the proposed expansion of[Utility Solutions'] service area is to fill gaps
between the current place of use and the service areas of neighboring utility providers.")
which was not explicitly addressed in the Final Order, is not a finding of fact "essential to
the decision" pursuant to MAPA. § 2-4-704(2)(b), MCA. The Final Order addressed the
City's arguments concerning overlapping places of use and included a map (Exhibit 1)
depicting the overlapping service areas, taking as true the City's contention that there were
no "gaps" in service areas. AR 1 / 0008-0009, 0011. Thus, the DNRC hearing examiner
analyzed the City's Objection assuming that there were no gaps in service areas, and the
City has not demonstrated that the PD's Finding of Fact.No. 10 resulted in prejudice to the
City's substantial rights.
The Court's conclusion that the MWUA does not protect the City's interests in this
case is dispositive of the issue presented. Therefore, the Court declines to address the
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City's and the Respondents' arguments regarding the nature of the City's interests in
specific water rights.
ORDER
IT IS HEREBY ORDERED that the DNRC's Final Order is AFFIRMED.
DATED: 0(/ (f-'
Hon. Rienne H. McElyea
District Court Judge
cc: Barbara Chill cott/C ameron Boster
Tim Cooper � �lll(�
Peter G. Scott
• Matthew Williams
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