HomeMy WebLinkAboutBozeman v Utility Solutions DNRC Answer
IN THE SUPREME COURT OF THE STATE OF MONTANA
Case 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.
__________________________________________________________________
On Appeal from the Montana Eighteenth Judicial District Court, Gallatin County
Cause No. DV-18-1323B
Hon. Rienne H. McElyea, Presiding
_________________________________________________________________
RESPONDENT/APPELLEE MONTANA DEPARTMENT OF NATURAL
RESOURCES AND CONSERVATION’S ANSWER BRIEF
__________________________________________________________________
ii
APPEARANCES:
Barbara Chillcott
Cameron S. Boster
Special Assistant Attorneys General
MONTANA DEPARTMENT OF NATURAL
RESOURCES AND CONSERVATION
1539 Eleventh Avenue
PO Box 201601
Helena, MT 59620-1601
Telephone: (406) 444-6336
Fax: (406) 444-2684
barbara.chillcott@mt.gov
cameron.boster@mt.gov
Attorneys for Respondent/Appellee,
Dept. of Natural Resources and
Conservation
Matt W. Williams
WILLIAMS & JENT, PLLP
506 East Babcock
Bozeman, MT 59715
Telephone: (406) 586-1373
Facsimile: (406) 586-4548
Mattheww53@aol.com
Attorney for Respondent/Appellee,
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
peter@scott-law.com
office@scott-law.com
Attorney for Petitioner/Appellant,
City of Bozeman
iii
TABLE OF CONTENTS
TABLE OF CONTENTS ......................................................................................... iii
TABLE OF AUTHORITIES ................................................................................... iv
ISSUE PRESENTED ................................................................................................. 1
STATEMENT OF THE CASE .................................................................................. 1
STATEMENT OF THE FACTS ............................................................................... 4
A. Competing Plans for Selling Municipal Water in a Growing Area. ............... 4
B. The Montana Water Use Act’s Protection from Adverse Effect..................... 7
STANDARD OF REVIEW ..................................................................................... 15
SUMMARY OF ARGUMENT ............................................................................... 18
ARGUMENT ........................................................................................................... 19
I. The City’s contention that the DNRC’s decision approving the
Change Application must be reversed because it was based on an
erroneous finding that there is no gap in service areas is both
incorrect and irrelevant. ...................................................................... 19
II. The MWUA does not protect the City from competition in the
market to provide municipal water to the Disputed Area. .................. 23
A. The MWUA does not provide the City an exclusive right to use
water based on a claimed “possessory interest” in the Disputed Area.
............................................................................................................. 23
B. The City’s plans to sell municipal water in the Disputed Area are
not protected by the MWUA. .............................................................. 26
C. The City cannot demonstrate that it holds any interest in water
rights that were issued for its planned municipal use in the
Disputed Area. ..................................................................................... 28
D. The MWUA’s qualifications for standing to object to a change
application does not expand the adverse effect test beyond that
which is required by § 85-2-402, MCA. ............................................. 31
iv
III. DNRC is charged with coordinating the development and use of water
resources of the State through the enforcement and administration of
the MWUA, and it has no authority to reward responsible municipal
planning or to thwart profit-driven motives. ....................................... 33
CONCLUSION ........................................................................................................ 34
CERTIFICATE OF COMPLIANCE ....................................................................... 36
TABLE OF AUTHORITIES
CASES
Bailey v. Tintinger,
45 Mont. 154, 122 P.575 (1912) ......................................................................... 25
Baitis v. Dep’t. of Revenue,
2004 MT 17, 319 Mont. 292, 83 P.3d 1278 ............................................... 17, 18
Baldwin v. Board of Chiropractors,
2003 MT 306, 318 Mont. 188, 79 P.3d 810 ....................................................... 16
City of Billings v. Public Serv. Comm’n of Montana,
193 Mont. 358, 631 P.2d 1295 (1981) ......................................................... 21, 22
DEQ v. BNSF Ry. Co.,
2010 MT 267, 358 Mont. 368, 246 P.3d 1037 ................................................... 17
Gassert v. Noyes,
18 Mont. 216, 44 P. 959 (1896) ............................................................................ 9
Glendive Medical Center v. Mont. Dept. of Public Health and Human Services,
2002 MT 131, 310 Mont. 156, 49 P.3d 560 ....................................................... 18
Head v. Hale,
38 Mont. 302, 100 P. 222 (1909) .......................................................................... 9
Holmstrom Land Co. Inc. v. Newlan Creek Water District,
185 Mont. 409, 605 P.2d 1060 (1979) .................................................................. 9
Kelly v. Teton Prairie, LLC,
2016 MT 179, 384 Mont. 174, 376 P.3d 143 ....................................................... 8
Lokowich v. Helena,
46 Mont. 575, 129 P. 1063 (1913) ........................................................................ 9
v
CASES (Cont'd….)
Mclntosh v. Graveley,
159 Mont. 72, 495 P.2d 186 (1972) ...................................................................... 9
MEIC, et al. v. DEQ,
2019 MT 213, 397 Mont. 161, 451 P.3d 493 ..................................................... 17
Mont. Power Co. v Public Service Comm’n,
2001 MT 102, 305 Mont. 260, 26 P.3d 91 ......................................................... 16
Mont. Sports Shooting Ass’n v. State,
2008 MT 190, 344 Mont. 1, 185 P.3d 1003 ....................................................... 28
Montana Trout Unlimited v. DNRC,
2006 MT 72, 331 Mont. 483, 133 P.3d 224 ....................................................... 18
Quigley v. McIntosh,
110 Mont. 495, 103 P.2d 1067 ............................................................................. 9
Qwest Corp. v. Mont. Dept. of Public Service Regulation,
2007 MT 350, 340 Mont. 309, 174 P.3d 496 .............................................. 16, 17
Roe v. City of Missoula,
2009 MT 417, 354 Mont. 1, 221 P.3d 1200 ....................................................... 16
Roos v. Kircher Pub. Sch. Bd. of Trustees,
2004 MT 48, 320 Mont. 128, 86 P.3d 39 ........................................................... 16
Silva v. City of Columbia Falls,
258 Mont. 329, 852 P.2d 671 (1993) .................................................................. 16
Spokane Ranch & Water Co. v. Beatty,
37 Mont. 342, 96 P. 727 (1908) ..................................................................... 9, 11
State v. Triplett,
2008 MT 360, 346 Mont. 383 195 P.3d 819 ...................................................... 28
Swan Corp. v. Montana Dep't of Revenue, Liquor Div.,
232 Mont. 210, 213, 755 P.2d 1388 (1988) ........................................................ 18
Thompson v. Harvey,
164 Mont. 133, 519 P.2d 963 (1974) .................................................................... 9
U.S. West, Inc. v. Dept. of Revenue,
2008 MT 125, 343 Mont. 1, 183 P.3d 16 ........................................................... 17
vi
MONTANA CODE ANNOTATED (2015)
§§ 1-2-101 through 1-2-107, MCA .......................................................................... 18
§ 1-2-102, MCA ................................................................................................ 17, 33
§§ 2-4-601 through 2-4-623, MCA ............................................................................ 2
§§ 2-4-701 through 2-4-704, MCA ............................................................................ 3
§ 2-4-704, MCA ....................................................................................................... 16
§ 2-4-704(2), MCA ........................................................................................... 15, 17
§ 2-4-704(1), MCA .................................................................................................. 15
§ 2-4-704(2)(b), MCA .............................................................................................. 21
§ 7-13-2341, MCA ................................................................................................... 22
§ 76-1-101, MCA ....................................................................................................... 5
§ 76-1-601, MCA .............................................................................................. 20, 24
§ 85-2-101(6), MCA ................................................................................................ 10
§ 85-2-302, MCA ....................................................................................................... 2
§ 85-2-307(2), MCA .................................................................................................. 2
§ 85-2-307, MCA ....................................................................................................... 2
§ 85-2-308(3), MCA ......................................................................................... 32, 33
§ 85-2-308, MCA ................................................................................................ 2, 31
§ 85-2-311(1)(b), MCA .................................................................................... 11, 12
§ 85-2-311(1)(f), MCA ............................................................................................ 12
§ 85-2-311(1)(g), MCA ........................................................................................... 12
§ 85-2-313, MCA ....................................................................................................... 4
§ 85-2-360(3)(a), MCA ............................................................................................ 13
§ 85-2-401(1), MCA ....................................................................................... 8, 9, 11
§ 85-2-402, MCA ............................................................................................. passim
§§ 85-2-402(1), MCA ................................................................................................ 4
§ 85-2-402(2), MCA ..................................................................................... 8, 10, 33
§ 85-2-402(2)(a), MCA .................................................................................... passim
vii
MONTANA CODE ANNOTATED (2015) (Cont'd…..)
§ 85-2-402(2)(d), MCA ........................................................................................... 23
§ 85-2-402(2)(f), MCA ............................................................................................ 12
§ 85-2-402(2)(g), MCA ........................................................................................... 12
§ 85-2-402(12), MCA ................................................................................................ 4
Title 7, Chapters 22 and 23, MCA ........................................................................... 22
ADMINISTRATIVE RULES OF MONTANA (2015)
ARM 36.12.101 ........................................................................................................ 10
ARM 36.12.101(25) ................................................................................................. 10
ARM 36.12.117(9)(g) .............................................................................................. 32
ARM 36.12.1802 ...................................................................................................... 24
ARM 36.12.1903 ............................................................................................... 13, 14
1
ISSUE PRESENTED
Did the Montana Department of Natural Resources and Conservation’s
(“DNRC”) hearing examiner and the district court correctly conclude that the
change in the place of use of a municipal use right, which created an overlap with
the City’s water facility planning boundary, did not result in adverse effect
pursuant to § 85-2-402(2)(a), MCA, as a matter of law?
STATEMENT OF THE CASE
Utility Solutions, LLC (“Utility Solutions”), a private water and wastewater
utility, is the owner of Beneficial Water Use Permit No. 41H 30046241 (the
“Provisional Permit”), an unperfected permit, with a priority date of June 29, 2009.
AR 2:14.1 The Provisional Permit authorizes Utility Solutions to appropriate and
make available 1,140.68 acre-feet of water per year at a flow rate of 3,420 gallons
per minute for municipal purposes in a designated place of use, which is generally
located in the Four Corners area west of Bozeman in Gallatin County, Montana.
AR 2:14-16. On March 27, 2017, Utility Solutions filed water right change
application No. 41H 30110660 (the “Change Application”) with the DNRC for
approval to expand the area where it is authorized to provide municipal water
under its Provisional Permit, pursuant to the water right change criteria set forth in
1 References to the Administrative Record follow the following format: AR [Tab
#]:[Page #].
2
the Montana Water Use Act (“MWUA”) at § 85-2-402, MCA (2015). AR 2:13.
The Change Application was deemed correct and complete, pursuant to § 85-2-
302, MCA, on September 22, 2017. Id.
On January 19, 2018, the DNRC regional office issued the Preliminary
Determination to Grant Change (the “PD”), pursuant to § 85-2-307, MCA,
preliminarily determining that Utility Solutions proved the statutory criteria in §
85-2-402, MCA, for the change requested in its Change Application, and the
change should be authorized by the DNRC. AR 2:33. Notice of the PD was
thereafter provided, pursuant to § 85-2-307(2), MCA. AR 11:106-136. The City
of Bozeman (the “City”) filed an objection to the Change Application on April 13,
2018, in compliance with § 85-2-308, MCA (the “Objection”). AR 17:166-177. In
its Objection, the City alleged that Utility Solutions failed to prove that the Change
Application would not “adversely affect the use of the existing water rights of [the
City] 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 . .
.” § 85-2-402(2)(a), MCA. AR 17:169.
The DNRC appointed a hearing examiner on May 17, 2018, to preside over
a contested case on the City’s Objection, conducted pursuant to the Montana
Administrative Procedure Act (“MAPA”), §§ 2-4-601 – 623, MCA. AR 39:317-
0321. The City and Utility Solutions filed cross motions for summary judgment on
3
September 7, 2018. AR 32:290-299; AR 31:230-289; AR 30:228-229; AR 29:
220-227. After the motions were fully briefed (AR 28:214-219; AR 27:207-213;
AR 25: 197-204), the DNRC hearing examiner issued the Final Order on Motions
for Summary Judgment on November 29, 2018 (the “Final Order”), denying the
City’s motion for summary judgment, granting Utility Solutions’ motion for
summary determination, and granting the Change Application as provided in the
PD. AR 1:9; City’s Appendix 1.
On December 21, 2018, the City filed its Petition for Judicial Review of
Final Order on Motions for Summary Judgment with the district court pursuant to
MAPA’s judicial review provisions, §§ 2-4-701 – 704, MCA. Dist. Ct. Docket No.
1, Case Register Report (Dec. 9, 2019). In front of the district court, the City
argued that the expansion of 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. Order on Petition for Judicial Review 5, Cause No. DV-18-
1323B, Mont. Eighteenth Jud. Dist. Ct. (Nov. 6, 2019) (the “Order”).
After the matter was fully briefed, the district court held oral argument on
August 8, 2019. After consideration of the parties’ proposed orders filed with the
court on August 29, 2019 (Docket Nos. 19, 20, and 21), the district court issued its
Order, concluding that the MWUA does not protect the City’s interests raised in
4
this case as a matter of law, and affirming the DNRC’s Final Order. Order 13-14.
The City filed a timely appeal.
STATEMENT OF THE FACTS
A. Competing Plans for Selling Municipal Water in a Growing Area.
Both the City and Utility Solutions have plans to provide municipal water to
an area lying northwest of the City limits, “which is anticipated to develop at city-
densities.” AR 31:231. Utility Solutions acquired its Provisional Permit2 in 2009
and has until December 31, 2031, to perfect the maximum authorized flow rate and
volume of water. AR 2:22. During the perfection period, Utility Solutions may
apply for and receive authorization from the DNRC to change its Provisional
Permit by complying with the water right change provisions set forth in the
MWUA. §§ 85-2-402(1), (2), and (12), MCA. Utility Solutions exercised its right
to do so when it submitted its Change Application to the DNRC on March 27,
2017. The Change Application provided that the purpose of the change was to
modify the place of use to provide municipal water to:
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 Rae County Water and Sewer District services 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
2 “A permit issued prior to a final determination of existing water rights is
provisional and is subject to that final determination.” § 85-2-313, MCA.
5
District or provide their own public water system utilizing the
[Provisional Permit].
AR 4:55.
In July 2017, a few months after Utility Solutions filed the Change
Application, the City completed a water facility plan update (the “2017 Water
Facility Plan”). AR 31:231. 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 2017 Water Facility Plan added lands northwest of the
City limits which lie outside of the City’s current Growth Policy planning area
boundary. AR 31:231. The City’s Growth Policy has not yet been amended to
reflect the 2017 Water Facility Plan boundaries. AR 31:231, ¶¶ 8-9.
Through its Change Application, Utility Solutions seeks authorization from
the DNRC to expand the place of use for its Provisional Permit which would result
in a 2,600-acre overlap between the City’s updated 2017 Water Facility Plan
boundary and the authorized place of use for Utility Solutions’ Provisional Permit.
AR 31:232, ¶ 13. The overlapping area is referred to in the administrative record
and herein as “the Disputed Area.” AR 1:2. The City’s plan to one day provide
water to the Disputed Area is currently a plan on paper. Petitioner/Appellant City
of Bozeman’s Opening Brief 33 (Jan. 13, 2020) (“City’s Opening Brief”). The
district court asked about the status of the City’s plan: “. . . [w]hat practical effect
does [the Change Application] really have on you then? . . . there[ are] no pipes in
6
the ground, are there?” The answer was, “[n]o . . . What there is is a plan.” Full
Transcript of Proceedings, Petition for Judicial Review Hearing 20:8-12 (August 8,
2019).
The City holds contract interests in water rights that it plans to use in the
Disputed Area someday. City’s Opening Brief 29. In its Objection, the City
provided:
. . . the City holds Reservation 41H 7011800 to accommodate
increased municipal demand from projected growth. In addition, the
City holds substantial shares in the State's Hyalite Reservoir Project
water rights, which identify the Disputed Area as a place of use and
are critical to serving planned development necessary to meet
projected growth. See Statement of Claim 41H 119496 00. Finally,
the City holds shares in rights owned by the Farmers Canal Company
which also include the Disputed Area in the place of use for non-
potable applications. Use of these waters is reflected in the City's
planning documents, which state "existing surface irrigation water
rights held by the City partially cover the planned development."
AR17:170.
The City concedes that before and after the Change Application is granted, the
amount of water available to fulfill the City’s water rights will not be affected in
any way. Order 12; AR 1:8.
Yet, the City objected to the Change Application because Utility Solutions’
plan to make municipal water available in the Disputed Area will compete with the
City’s plan to do the same. City’s Opening Brief 17. On appeal, the City argues
that the DNRC and the district court incorrectly concluded that the MWUA does
7
not protect the City’s interests in this case. If Utility Solutions is allowed to
expand the place of use for its Provisional Permit, the City alleges that it will be
adversely affected under § 85-2-402(2)(a), MCA, because the “[Change]
Application intrudes upon the orderly and efficient development of publicly owned
and maintained infrastructure . . .” City’s Opening Brief 14. Specifically, the City
alleges that any parcels served by Utility Solutions in the Disputed Area will
reduce the place of use available for planned uses of water rights held by the City.
Further, the City speculates that Utility Solutions’ private infrastructure will
interfere with easements or rights-of-way acquisition needed for the City’s
infrastructure, and competition will drive prices up for those easements and rights
of way and for operation and maintenance. Id. The City argues that the MWUA
protects it from this undesirable competition.
B. The Montana Water Use Act’s Protection from Adverse Effect. 3
An applicant for a water right change must affirmatively prove all of the
relevant criteria in § 85-2-402, MCA, by a preponderance of the evidence. In this
case, Utility Solutions was required to prove:
(a) The proposed change in appropriation right will not adversely
affect the use of the existing water rights of other persons or other
3 The DNRC filed “Respondent DNRC’s Order on Petition for Judicial Review
(Proposed),” with the district court on August 29, 2019. Dist. Ct. Docket No. 21.
The district court’s Order incorporated some of the background information on the
MWUA from the DNRC’s Proposed Order. Much of that background information
is reproduced herein for the Court’s convenience.
8
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.
(b) The proposed means of diversion, construction, and operation
of the appropriation works are adequate . . .
(c) The proposed use of water is a beneficial use.
(d) The applicant has a possessory interest, or the written consent
of the person with the possessory interest, in the property where the
water is to be put to beneficial use . . .
§ 85-2-402(2), MCA.
If an applicant proves the § 85-2-402(2), MCA, criteria, the DNRC “shall
approve the change in appropriation right.” The City contends the DNRC erred in
approving the Change Application because the resulting competition for customers
in the Disputed Area will “adversely affect the use of the existing water rights of
[the City] 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 . .
.” § 85-2-402(2)(a), MCA. The City concedes that the availability of water to
which it is entitled under its water rights or interests in water rights will not be
adversely affected. Order 13; AR 1:8. Rather, the City argues that what is
adversely affected are its plans and its possessory interest in the Disputed Area.
City’s Opening Brief 28. The City’s position finds no basis in the law.
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; §
85-2-401(1), MCA (“As between appropriators, the first in time is the first in
9
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 Montana
appropriators have a vested right to maintain surface and ground water conditions
substantially as they existed at the time of their appropriation; subsequent
appropriators may insist that prior appropriators confine their use to what was
actually appropriated or necessary for their originally intended purpose of use; and,
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, 731 (1908); Quigley v. McIntosh, 110 Mont. 495, 505 103 P.2d 1067,
1072-74.4
As of the effective date of the MWUA on July 1, 1973, an appropriator must
seek authorization from the DNRC prior to changing a water right. § 85-2-402,
4 See also Holmstrom Land Co. Inc. v. 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 P.2d 963(1974) (plaintiff could not
change his diversion to a point upstream of the defendants because of the injury
resulting to the defendants); Mclntosh v. Graveley, 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. Hale, 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).
10
MCA. A water right consists of several elements which include, but are not
limited to, the factors listed in Administrative Rule of Montana (“ARM”)
36.12.101(25)(2015). 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), MCA. 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.
Utility Solutions applied to DNRC to change the place of use of its
Provisional Permit. “Place of use” is “the land, facility, or site where water is
beneficially used.” ARM 36.12.101. The only change criterion at issue in this
matter is 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 “adverse effect” or “adversely affect” are not defined in the
MWUA. However, the context in which adverse effect is to be examined is
evident from the plain reading of the MWUA, DNRC’s rules adopted to implement
the MWUA, and review of a century of case law. The MWUA’s protection of
water rights from adverse effect from a new appropriation or a change in
11
appropriation right seeks to preserve to water right holders the same amount of
water, at the same rate, at the same location, and at the same timing so that
appropriators may continue to reasonably exercise their water rights under the
changed conditions. § 85-2-401(1), MCA; see, e.g., cases cited in fn. 4, supra.
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 appropriation or change in appropriation will not adversely
affect certain enumerated 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 [s]he located, and that [s]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.2d at 731. Pursuant to § 85-
2-401(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.”
12
The MWUA expands on the common law definition of “adverse effect” by
enumerating four specific categories of interests that may not be adversely affected
by a change in appropriation right:
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 appropriator,” § 85-2-402(2)(f), 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.5
The legal concept of adverse effect is also illustrated in the permitting
context. Notably, the statutory criteria for new permits require an applicant to
prove no adverse effect to the same specific interests set forth in the change statute.
See, § 85-2-311(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
of 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
5 The criteria in (f) and (g) are required to be met only if a valid objection is filed.
These criteria are not at issue in this matter.
13
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 . . .
(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.
ARM 36.12.1903.
14
Finally, the DNRC’s Guidance for Municipal Purposes & Water Rights
(Aug. 12, 2014) (“Municipal Guidance”), on which the City relies, 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.
AR 31:283-289 (emphasis added)
The MWUA’s protection of existing rights from adverse effect is thus a
well-established legal principle that requires the DNRC to ensure that the specific
interests in water rights enumerated in the change statute are preserved. The
MWUA’s prohibition against adverse effect does not protect against all
conceivable forms of harm to all conceivable interests. The adverse effect test is
15
meant to ensure water right holders can continue to reasonably exercise their water
rights – with the same amount of water being available at the same rate, at the
same timing, at the same location (and with valid objections, at the same quality
and providing the same dilution levels to satisfy discharge permits) – under the
changed conditions. Importantly, the MWUA does not protect the City’s interest
in the integrity of the its municipal planning efforts.
STANDARD OF REVIEW
This Court’s review is governed by MAPA and 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;
o r
(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”
16
not simply a difference of opinion. Silva v. City of Columbia Falls, 258 Mont.
329, 335, 852 P.2d 671, 675 (1993).
This Court applies the same standard of review as the district court when
reviewing an agency decision. Qwest Corp. v. Mont. Dept. of Public Service
Regulation, 2007 MT 350, ¶ 15, 340 Mont. 309, 174 P.3d 496 (citing Mont. Power
Co. v Public Service Comm’n, 2001 MT 102, ¶ 118, 305 Mont. 260, 26 P.3d 91).
This Court “must accordingly determine whether an agency's findings of fact are
clearly erroneous and whether its conclusions of law were correct.” Roos v.
Kircher Pub. Sch. Bd. of Trustees, 2004 MT 48, ¶ 7, 320 Mont. 128, 86 P.3d 39
(citing Baldwin v. Board of Chiropractors, 2003 MT 306, ¶ 10, 318 Mont. 188, 79
P.3d 810; § 2-4-704, MCA).
The Final Order was issued in response to cross motions for summary
judgment by the City and Utility Solutions. The reviewing court considers a
petition for judicial review from a final agency action on summary judgment de
novo, pursuant to Mont. R. Civ. P. 56. Under Mont. R. Civ. P. 56, an agency
should grant a party’s motion for summary judgment “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.” M. R. Civ. P. 56(c)(3); Roe v. City of Missoula, 2009 MT 417, ¶
14, 354 Mont. 1, 221 P.3d 1200.
17
In an appeal of an agency decision, questions of law are reviewed to
determine whether the agency’s interpretation of law is correct. Qwest Corp., ¶ 15,
§ 2-4-704(2), MCA. 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, ¶¶ 22-24, 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, ¶ 19,
343 Mont. 1, 183 P.3d 16. While this Court will not defer to an incorrect or
unlawful agency decision, it will defer to an agency action within permissible
statutory bounds. In doing so, it recognizes that agencies are both empowered and
constrained by applicable statutes and regulations. MEIC, et al. v. DEQ, 2019 MT
213, ¶ 22, 397 Mont. 161, 451 P.3d 493.
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; § 1-2-102, MCA. 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
18
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, ¶ 14, 310 Mont.
156, 49 P.3d 560. An agency abuses its discretion if its “interpretation of a statute
is clearly contrary to the legislative intent behind that statute.” Swan Corp. v.
Montana Dep't of Revenue, Liquor Div., 232 Mont. 210, 213, 755 P.2d 1388, 1390
(1988) (citations omitted).
SUMMARY OF ARGUMENT
The DNRC hearing examiner and the district court considered the City’s
argument that no gaps existed in municipal water service areas and granting the
Change Application would result in a geographic overlap in the Disputed Area.
With full recognition of that undisputed fact, both the DNRC hearing examiner and
the district court correctly concluded that the proposed change to Utility Solutions’
Provisional Permit does not constitute “adverse effect,” pursuant to § 85-2-
402(2)(a), MCA.
As discussed above, the MWUA sets forth the types of interests in water
protected from adverse effect – and any reasonable interpretation of the statute
19
reveals that the City’s plan for delivering water to the Disputed Area one day is not
one of those interests. A review of the record clearly reveals that Utility Solutions
proved by a preponderance of the evidence that the proposed change to its
Provisional Permit will not cause adverse effect to the interests alleged by the City
because those interests are not protected by the MWUA as a matter of law.
Not only is the City asking this Court to prevent another water utility from
encroaching on its plans for selling municipal water in the Disputed Area, it is
essentially arguing that no new water rights can be developed in the Disputed Area
or anywhere within the 2017 Water Facility Plan boundaries without adversely
affecting the City. This is not an issue of first impression for the Court’s
consideration. Rather, the City makes a policy argument that is completely
untethered from the law. The City is urging this Court to authorize a fundamental
departure from the MWUA and the prior appropriation doctrine upon which it is
based. The Court should reject the City’s invitation to expand the MWUA and
affirm the district court’s Order.
ARGUMENT
I. The City’s contention that the DNRC’s decision approving the Change
Application must be reversed because it was based on an erroneous
finding that there is no gap in service areas is both incorrect and
irrelevant.
The City contends that Utility Solutions’ Change Application and the
DNRC’s subsequent PD granting the proposed change were based on the false
20
premise that there are “gaps” in municipal service areas. City’s Opening Brief 11-
16. This argument mischaracterizes the administrative record. First, the DNRC
hearing examiner directly addressed the City’s argument about the lack of “gaps.”
The DNRC’s Final Order explicitly responds to the City’s argument that the
Change Application will result in a geographic overlap between the place of use
for Utility Solutions’ Provisional Permit and the City’s updated water facility
planning area boundary. AR 1:3, Order 13. The Final Order framed the question
presented in the contested case as:
Question: Does a change of use proposal pursuant to § 85-2-402,
MCA, that results in the geographic overlap of the place of use with
City of Bozeman's Growth Policy and Water Facility Plan adopted
pursuant to § 76-1-601, MCA, constitute "adverse effect" to the City's
water rights, or interests in water rights, held to satisfy future demand
within the Growth Policy boundaries under § 85-2-402(2)(a), MCA?
AR 1:3 (emphasis in original).
The hearing examiner also observed;
Implicit in the City's argument is that a place of use is exclusive to a
particular water right. However, separate water rights can have
overlapping places of use. Indeed, the very water rights that the City
relies on identify large areas of overlapping places of use - for the
same purpose of use . . . In addition, the [Utility Solutions’] existing
place of use entirely overlays the existing place of use for Four
Corners County Water & Sewer District place of use - both of them
for municipal purposes . . . Even the City's existing water rights and
water reservation places of use currently overlap with both Farmers
Canal and Middle Creek Water Users places of use. Such overlap is
certainly not uncommon.
AR 1:8-9.
21
Although the PD included a finding based on Utility Solutions’ Change
Application that “the intent of the proposed expansion of [Utility Solutions’]
service area is to fill gaps between the current place of use and the service area of
neighboring utility providers,” the district court determined this “is not a finding of
fact ‘essential to the decision’ pursuant to MAPA § 2-4-704(2)(b), MCA.” Order
13. Moreover, the district court found the Final Order “[took] as true” that there
were no gaps in service areas and “addressed the City’s argument concerning
overlapping places of use . . .[T]he DNRC hearing examiner analyzed the City’s
Objection assuming 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.” Id.
The City acknowledges that the DNRC hearing examiner considered its
argument about overlapping service areas. City’s Opening Brief 15 (“When the
City objected, DNRC determined that it does not matter because service areas can
overlap.”) However, relying on an opinion regarding the jurisdiction of the
Montana Public Service Commission (“PSC”), the City argues, “service areas
cannot overlap.” Id. The City’s reliance on City of Billings v. Public Serv.
Comm’n of Montana, 193 Mont. 358, 368-69, 631 P.2d 1295, 1302 (1981), for the
proposition that municipal water rights cannot have overlapping places of use or
service areas, is misplaced. City of Billings does not address whether the MWUA
22
– or any authority – prohibits municipal water rights from having overlapping
places of use. In that case, the Court ruled on the extent of the PSC’s jurisdiction
over the service area boundaries of a county water district, a unit of local
government, with official boundaries established pursuant to Title 7, Chapters 22
and 23, MCA. The City of Billings court held:
The PSC has no jurisdiction over the expansion of the District
boundaries. According to section 7-13-2341, MCA, control over the
size of the District is expressly vested in the board of directors and the
electors. The statute makes no mention of a requirement of PSC
approval before land may be added to a county water district. The
PSC was not given jurisdiction to fix the boundaries of a county water
district and as an administrative agency the PSC may not assume
jurisdiction without express delegation by the legislature.
193 Mont. 358, 369, 631 P.2d 1295, 1303. City of Billings is simply not relevant
to the facts or issues presented in this case.
Nothing in the MWUA prohibits overlapping places of use. The location of
Utility Solutions’ proposed place of use vis-à-vis the City’s updated water facility
planning boundary is not a criterion the MWUA authorizes the DNRC to consider
when evaluating Utility Solutions’ Change Application. Although the PD included
the finding that the purpose of the Change Application was to fill a gap in service
areas as part of the application narrative, whether a gap exists in service areas does
not affect whether Utility Solutions satisfied the § 85-2-402, MCA, criteria for
issuance of the change authorization. The Change Application was not approved
based on the finding that service area gaps would be filled, as the City charges.
23
City’s Brief 16. Rather, the Change Application was approved because Utility
Solutions proved the § 85-2-402, MCA, criteria by a preponderance of the
evidence, which compelled the DNRC to grant the Change Application.
II. The MWUA does not protect the City from competition in the market to
provide municipal water to the Disputed Area.
A. The MWUA does not provide the City an exclusive right to use water
based on a claimed “possessory interest” in the Disputed Area.
The City claims DNRC’s Municipal Guidance grants it exclusive possessory
interest in the Disputed Area, which bestows on the City a legal right to distribute
municipal water in the Disputed Area with no competition. City’s Opening Brief
27. However, the City misconstrues the legal significance of the MWUA’s
requirement and the DNRC’s finding that an applicant has “possessory interest” in
a place of use for a new water right or change in a water right.
An applicant for a change in appropriation right must prove by a
preponderance of the evidence that “it has a possessory interest, or the written
consent of the person with the possessory interest, in the property where the water
is to be put to beneficial use.” § 85-2-402(2)(d), MCA. The DNRC’s
administrative rule on “possessory interest” provides:
(1) An applicant or a representative shall sign the application affidavit
to affirm the following . . . (b) except in cases of an instream flow
application, or where the application is for sale, rental, distribution, or
is a municipal use, or in any other context in which water is being
supplied to another and it is clear that the ultimate user will not accept
the supply without consenting to the use of water on the user's place
of use, the applicant has possessory interest in the property where the
24
water is to be put to beneficial use or has the written consent of the
person having the possessory interest.
ARM 36.12.1802.
Lastly, the DNRC’ Municipal Guidance provides:
When reviewing water right applications, the [DNRC] 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. Municipalities
should consider the extent of their defined growth boundaries in the
context of potential water right application when compiling their
growth policy. The [DNRC] 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 31:286.
The City claims “‘possessory interest’ is a protected ownership interest.”
City’s Opening Brief 4. According to the City, because the “Disputed Area is
within the City’s planning boundary . . . [it] holds a possessory interest to provide
municipal service in the Disputed Area.” City’s Opening Brief 4. Moreover, the
City asserts that when it adopted its 2017 Water Facility Plan, it established the
exclusive possessory interest for distributing water in the Disputed Area. (“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. Before the Application was
accepted, the City established the possessory interest and acquired a legal right to
25
use water beneficially under rights issued to meet future demand in the Disputed
Area . . .” (City’s Opening Brief 27) (emphasis added).)
However, the City’s reliance on the Municipal Guidance to demonstrate that
it has a protected entitlement to provide municipal water in the Disputed Area is
improper. The Municipal Guidance merely establishes that – if the City were to
apply for a new water use permit or change in appropriation right – the boundaries
of its properly adopted Growth Policy are sufficient to prove the possessory
interest criterion. The concept that an appropriator for sale, rental, or distribution
need not “own, control, or possess” the place of use in order to have a valid
appropriation originates from this Court’s decision in Bailey v. Tintinger, where
the Court identified an exception to the anti-speculation doctrine inherent in the
MWUA. 45 Mont. 154, 122 P.575, 582 (1912).
The principle that an appropriation for sale, rental, or distribution is
complete without ownership or control of a place of use applies not only to the
City, but also to Utility Solutions, and any other person who lawfully appropriates
water for sale, rental, or distribution. If the City avails itself of the MWUA’s
permit or change process for appropriating water for beneficial use in the Disputed
Area or elsewhere within its 2017 Water Facility Plan boundaries, it will be able to
satisfy the possessory interest criterion by virtue of its duly adopted Growth Policy.
However, nothing in the MWUA prohibits overlapping places of use or allows
26
possessory interest to be established at the exclusion of all other would-be
appropriators.
The City argues the DNRC and the district court erred in dismissing its
Objection, because they “did not consider adverse effect to the City’s interests,
such as its possessory interest, or its legal right to use water for municipal
purposes, in the Disputed Area.” City’s Opening Brief 18. However, as set forth
above the MWUA protects four specific types of interests in water protected from
adverse effect. Neither the “possessory interest” the City claims, nor the City’s
perceived exclusive right to use water for municipal purposes in a particular place,
is among those four interests.
The City offers no legal basis for expanding the MWUA to include
protections for the City’s claimed future economic interests in offering water in a
particular area. Simply, the MWUA does not permit the DNRC to protect the
economic interests described by the City in this case.
B. The City’s plans to sell municipal water in the Disputed Area are not
protected by the MWUA.
The City argues that because it claims a protectable property interest in the
Disputed Area, it has established the Disputed Area as a “planned place of use” of
its water rights (“The City objected because Utility Solutions’ Application will
adversely affect the City’s planned place of use.” City’s Opening Brief 23.) The
City argues that because “place of use” is an element of its water rights, the
27
DNRC’s approval of Utility Solutions’ Change Application to supply municipal
water to the Disputed Area, “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.” Id. at 8. Further, “[p]rotecting
the City’s planned use from adverse effect protects the City’s possessory interest.”
Id. at 28.
The City presents its argument as an issue “of first impression regarding
protection of planned municipal use.” Id. at 18, 26. “Naturally,” according to the
City, the existing statutory and legal “authorities relied on by the DNRC and the
district court do not address the issue.” Id. Further, the City claims the well-
established legal principles relied on by the DNRC and the district court are
“distinguishable based on recognized differences between municipalities and other
water users.” Id. Yet, the City fails to point to any authority that recognizes the
difference between municipalities and any other appropriator seeking to
appropriate and provide municipal water to a particular place of use. Even an issue
of first impression must rely on existing law to anchor the argument.
Fundamentally, the City’s assertion that Utility Solutions’ Change Application will
result in adverse effect because it will interfere with the City’s planned municipal
use is completely untethered from any existing law.
28
C. The City cannot demonstrate that it holds any interest in water rights
that were issued for its planned municipal use in the Disputed Area.
The City’s argument that its “planned uses” are protected from adverse
effect by competition from another municipal water provider isolates the “planned
use” terminology from the context in which it is found in the statute. This 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.’” Order 12 (citing State v. Triplett, 2008 MT 360, ¶ 25, 346 Mont.
383 195 P.3d 819; Mont. Sports Shooting Ass’n v. State, 2008 MT 190, ¶ 11, 344
Mont. 1, 185 P.3d 1003).
The MWUA only protects “perfected or planned uses for which a permit or
certificate has been issued or for which a state water reservation has been issued.”
An applicant for a change must prove that a water right change will not adversely
affect perfected or planned uses, for which a permit or certificate or state water
reservation has been issued – not just any planned use related to water use. Even
assuming arguendo, that the MWUA protects against interference with the City’s
planned municipal use or planned place of use, it is not enough for the City to
claim its planned use would be adversely affected by competition in the Disputed
Area. The City must also show that a permit, certificate, or state water reservation
has been issued for that particular planned use. However, the City does not hold a
29
permit, certificate, or state water reservation issued for its 2017 plans to deliver
municipal water to the Disputed Area. AR 1:7.
Before the DNRC hearing examiner and the district court, the City argued
that it has three different interests in water rights that would be adversely affected
by the Change Application.6 Before this Court, the City asserts only its interests in
the Middle Creek Shares are adversely affected because the water rights owned by
the State of Montana7 for its Middle Creek Project were “issued expressly for the
purpose of meeting municipal demand.” City’s Opening Brief 28. Importantly,
the City’s rights in the Middle Creek Shares are merely contractual. The City’s
contractual rights in the Middle Creek Shares are not a permit, certificate, or state
water reservation.
The district court declined to address the arguments regarding the nature of
the City’s interest in specific water rights, finding its “conclusion that the MWUA
6 The interests in the water rights which the City claimed were adversely affected
are: (1) shares purchased by the City from Farmers Canal Company (“FCC”) under
an existing irrigation water rights owned by FCC; (2) shares purchased from
Middle Creek Water Users Association under two water rights (a claim and a
permit) for storage in the Hyalite Reservoir, both owned by the State of Montana
DNRC as part of its Middle Creek Project (the “Middle Creek Shares”); and (3) the
City’s unperfected state water reservation. AR 1:5-6.
7 The State of Montana, through DNRC, owns the water rights for storage in
Hyalite Reservoir, part of the State’s Middle Creek Project. The Middle Creek
Water Users Association operates the Middle Creek Project and provides contract
water to water users, including the City, who purchase shares in the Association.
30
does not protect the City’s interests in this case dispositive of the issue presented.”
Order 13-14. However, the hearing examiner considered the City’s arguments
related to its plans and interests in these water rights and concluded that “[n]one of
the water rights the City relies upon to support its argument involve a permit or
certificate or a state water reservation that was issued for its planned uses or
developments.” AR 1:5 (emphasis in original).
The City claims that the hearing examiner “expressly found” that the City’s
interest in Middle Creek Shares “legally entitles the City to deliver municipal
water in the Disputed Area.” City’s Opening Brief 30 (citing AR 1:5-6). On the
contrary, the DNRC hearing examiner concluded that, the “City has not pointed to
any permit, certificate or reservation that has been issued that contemplates
municipal use within the Disputed Area.” AR 1:7. Instead, the hearing examiner
pointed out that the water associated with the water right claim and the provisional
permit appropriated for the Middle Creek Project include a place of use consisting
of over 184,000 acres and over 46,000 acres (two townships), respectively. AR 1:
6. In addition, the claim was established in 1938 (AR 31:253), and the permit in
1984 (AR31:255), well before the City’s 2017 update to its water facility planning
boundary. Finally, the hearing examiner found that the City’s water purchase
contract for the Middle Creek Shares “reveals only that water provided to the City
will be ‘released for municipal consumption’ . . . [and] does not specify how the
31
City’s shares are to be used, importantly the contract does not specify a place of
use or planned uses or developments for the City’s shares.” AR 1:7. The City’s
assertion that, “[c]learly, water rights were issued for the City’s planned use” is
contrary to the undisputed facts in the record.
The water rights the City alleges will be adversely affected were not issued
for the purpose of serving the City’s interests or planned use of providing
municipal water to the Disputed Area. The hearing examiner’s findings were
supported by substantial, undisputed evidence in the record, and his conclusion that
these water rights (or the City’s interests in these water rights or plans to use its
interests in these water rights) were neither issued for the City’s planned use nor
will be adversely affected, is correct under the law.
D. The MWUA’s qualifications for standing to object to a change
application does not expand the adverse effect test beyond that which
is required by § 85-2-402, MCA.
The City argues that the “Water Use Act contains a provision for objecting,
§ 85-2-308, MCA, which protects property, water rights, or interests from being
‘adversely affected’ by a proposed change.” City’s Opening Brief 7-8. The
provision to which the City refers is the MWUA’s requirement for standing to
object to a water right application, which provides: “[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.” § 85-2-
32
308(3), MCA. The DNRC’s administrative rule is substantially the same as the
statute and provides, “[t]o 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 City argues it is “is entitled to object if its
possessory interest is adversely affected under § 85-2-308(3), MCA” (City’s Brief
28) and its “right to use water in the Disputed Area is a protected ‘interest’ within
the meaning of § 85-2-308(3), MCA.” Id. at 30.
The district court considered the City’s argument that “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 to
standing for filing objections based upon ‘other interests . . . adversely affected by
the proposed appropriation,’ protect its planning efforts from infringement by
Utility Solution’s Change Application.” Order 11 (citing §§ 85-2-308(3) and –
402(2)(a), MCA). The district court was not persuaded:
[t]he 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)(a). While
the MWUA’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 interests protected
from adverse effect from a change in appropriation right.
33
Order 10-11.
The City asserts that the “district court concluded erroneously that protection
of property or interests under § 85-2-308(3), MCA, must give way to enumerated
protections in § 85-2-402(2)(a), MCA. City’s Opening Brief 27-28. However, the
district court, not the City, correctly interpreted the relevant statutes. Statutory
construction is a holistic endeavor that must account for the whole of the statute’s
text and structure. DEQ, ¶ 56; § 1-2-102, MCA. If an applicant proves the criteria
for change in a water right contained in § 85-2-402(2), MCA, the DNRC “shall”
grant the application. An objector has standing to file an objection if the person
alleges that the change will cause adverse effect to the person’s “property, water
rights, or other interests.” The “adverse effect,” however, must be an adverse
effect to one of the four interests articulated in the statutory criteria. Those criteria
do not include a catch-all category for “other interests,” and they do not include the
interests the City raises in this case. A plain-language analysis of the MWUA
demonstrates that the standing language does not expand the adverse effect test
beyond that which is required by statute.
III. DNRC is charged with coordinating the development and use of water
resources of the State through the enforcement and administration of
the MWUA, and it has no authority to reward responsible municipal
planning or to thwart profit-driven motives.
The City urges this Court to expand the protections afforded by the MWUA
to prevent a private company from profiting “from publicly funded planning at the
34
public’s expense.” City’s Opening Brief 33. The City makes no secret of its
contempt for Utility Solutions’ profit-driven motivations, and it finds “DNRC’s
support of that position surprising.” Id. at 34.
In the State of Montana, no type of water use or user is given preferential
treatment or priority over other users. The City must comply with the MWUA like
any other water user, and the DNRC must apply the MWUA as it is written. What
the City characterizes as “support of [Utility Solutions’] position” is in fact a
straightforward application of the DNRC’s legislative mandate to grant an
application that has satisfied the statutory criteria. As the district court concluded:
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 its water
rights or interests in water rights will be diminished, the Court cannot
conclude the Final Order was issued in error. The Court is unable to
extend the protections in the MWUA to the City’s formal plans to use
water in the Disputed Area.
Order 13.
CONCLUSION
The City has not presented an issue of first impression for the Court’s
consideration. Rather, the City invites the Court to create new law by expanding
the MWUA to protect its planned use of water from competition. Importantly, if
the City does not prevail in its appeal, the City is still entitled to implement its plan
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to provide municipal water, consistent with its water rights and interests in water
rights. The difference will be that the City might not be able to do so under the
economic conditions it prefers. Fundamentally, the MWUA does not permit the
DNRC to contemplate speculative economic challenges when considering whether
to grant a change application.
The DNRC requests the Court to decline the City’s invitation to revise and
expand the protections in the MWUA for the City’s benefit. Instead, the DNRC
respectfully asks the Court to affirm the district court’s Order affirming the
DNRC’s Final Order granting the Change Application.
RESPECTFULLY SUBMITTED this 11th day of February, 2020.
/ s / B a r b a r a C hillcott
B A R B A R A C H I L L C O T T
C A M E R O N S . B O S T E R
A t t o r n e y s f o r R e spondent/Appellant
M O N T A N A D E P A R T M E N T O F
N A T U R A L R E S O U R C E S A N D
C O N S E R V A T I O N
36
CERTIFICATE OF COMPLIANCE
Pursuant to Montana Rule of Appellate Procedure 11(4)(d), I certify that
APPELLEE MONTANA DEPARTMENT OF NATURAL RESOURCES AND
CONSERVATION’S ANSWER BRIEF is printed with proportionately spaced Times
New Roman text typeface of 14 points; is double spaced (except for footnotes and
quotes); and the word count, calculated by Microsoft Word 2016, is 8,959 words,
excluding this Certificate of Compliance, the Table of Contents, and the Table of
Authorities.
DATED this 11th day of February, 2020.
/ s / B a r b a r a C hillcott
B A R B A R A C H I L L C O T T
A t t o r n e y f o r R e spondent/Appellant
M o n t a n a D e p a r t m e n t o f N a t u r a l
R e s o u r c e s a n d C o n s e r v a t i o n
CERTIFICATE OF SERVICE
I, Barbara L Chillcott, hereby certify that I have served true and accurate copies of the foregoing
Brief - Appellee's Response to the following on 02-11-2020:
Peter Guillum Scott (Attorney)
682 Ferguson Ave #4
Bozeman MT 59718
Representing: Bozeman, City of
Service Method: eService
Matthew W. Williams (Attorney)
506 e. babcock
bozeman MT 59715
Representing: Utility Solutions, LLC
Service Method: eService
Electronically signed by Aliselina Strong on behalf of Barbara L Chillcott
Dated: 02-11-2020