Montana Water Rights-Value for Montana Farms & Ranches
Montana water rights are a large issue in selling Farms and Ranches in Montana. Bottomline, water is becoming more and more valuable and vastly affects the value of a property. The term water is the new oil is being heard more and more in investment circles. With an ever growing population there will be more and more demands on water use in Montana. Thus values of properties with good Montana water rights should hold and increase in value quicker than those that do not. This post gives you a brief summary of Montana water rights as it relates to Montana Farms and Ranches. I will do my best to try and keep it interesting. I highly recommend hiring legal help in researching and verifying Montana water rights of a property. It is a critical issue and you want to be sure of what rights you are purchasing or selling.
The Department of Natural Resources & Conservation(DNRC)is the government agency that oversees Montana water rights. There are 85 water basins in Montana. As a water rights owner in Montana you don’t own the water itself. You own the right to legally use the water in the prescribed manner represented in the claim.
Montana water rights are broken into two groups:
-Prior to 7/1/73 and is called Adjudication Bureau
-After & On 7/1/73 is administered by New Appropriations Program
New water rights are still granted in the State of Montana. Montana Ranches and Farms have established rights and most of the new rights are dealing with more Urban or Residential areas. It starts with an Application for a permit with Montana DNRC. The DNRC researches whether the application meets requirements of statute, rules and regulations. If DNRC deems it good, it is deemed Correct and Complete. After reviewing factual and legal basis of application and rights the DNRC will make initial findings and publish Notice. If there is no valid objections that are raised then the permit is issued. Notice key vague words all through out when talking water rights. This gives Montana flexibility on a number of critical, complicated and varying factors in determining and granting water rights. There is no absolute and I believe it will become more difficult over time to acquire new rights. The Permit describes the Appropriation and owner has to show Proof of Perfection. Once the permit is perfected it shows appropriation has been put to beneficial use as described by permit.
Types of Water Rights
The types of water rights in Montana are again determined by the important date of 7/1/73. Most rights prior to 7/1/73 were Use Rights. There was no recording, approval or written record of the right. The Priority date of use rights is the date water was first put to beneficial use. If only some old Montana famers and ranchers had realized the long term value of there rights in water. Some ancestors are living very different lives due to the hard work of previous generations securing water rights. There were also Filed Rights that were filed with local County Clerk & Recorders office under system recognized in 1885 all the way up to 7/1/73.
For those coming from out of state, you can’t assume that water rights are the same as the state you are coming from. Numerous states use Riparian Water Rights. This means the owner has the right to make reasonable use of groundwater or surface water. Riparian rights are not limited by a start of use date(Priority Date) and cannot be lost by non use. Montana does not recognize Riparian rights.
There are a number of agencies in Montana that play a role in administering water rights. They are: DNRC, Montana Water Court, District Courts, the Reserved Water Rights Compact Commission, the Attorney General, and Water Policy Interim Committee and Environmental Quality Council(EQC). The DNRC comes into play on water uses after the June 30,1973 date. They have records of all permits, changes, certificates and water reservations after June 30, 1973 and for all water right claims filed through statewide adjudication. The Attorney General has the right to intervene on behalf of the state and appears in front of the Water Court. The EQC has policy oversight and updates the legislature, oversees the DNRC and communicates with the public. As always in government there is a lot of overlap between agencies. Go figure.
The first basin adjudicated was the Powder River Basin in 1973 and as the state has grown with more water use both rural and urban locations water has become a much more complicated issue. So, in 1979 the Legislature came out with Senate Bill 76 that encompassed the whole state. Existing water rights are those that originated legally before July 1, 1973 and are referred to as pre 1973 water rights. The adjudication is still not finished. Like I said, water is complicated.
While we talk about Montana water rights from an agricultural and domestic use there is another very strong consideration for water. The revenue brought in from tourism to Montana coming to fish and see our beautiful and historic rivers would also be impacted by over use of water. Thus in 1969 the Legislature gave Montana Fish and Game the authority to oversee flows in 12 streams for the preservation of fish and wildlife habitat. The streams are: Big Spring Creek, Blackfoot River, Flathead, Middle Fork and South Fork Flathead River, Gallatin, West Gallatin, Madison, Missouri, Rock Creek, Smith and Yellowstone River. These are your blue ribbon streams that every fly fisherman has on their bucket list. They deserve to be protected.
Federal/Tribal Lands & EPA Clean Water Act
Another complication is the Montana water rights on federal lands and tribal lands. This is handled by negotiations of Montana’s Reserved Water Rights Compact Commission(RWRCC). Claims of tribes depend on what the use of the land was originally intended for and all settlements have to be approved by Montana, Tribal Councils and the federal government. There are seven Indian reservations that have claims as well as the federal government for national parks, forests, wildlife refuges and designated wild and scenic rivers.
After 1973, anyone that plans on developing either surface water or ground water for beneficial use is required to acquire a permit and to get a Certificate of Water Right. The DNRC is the agency that oversees this permit process. Beneficial use includes domestic, stock, irrigation, lawn and garden, mining, municipal,industrial, commercial, agricultural spraying, fisheries, wildlife and recreation. Some areas you can no longer get permits based upon the demand already being put on the basin. The permit is required before any construction is done to use water. There are exceptions to this where a pit or reservoir has less then 15 acre feet and less than 30 acre feet of appropriation. When it comes to groundwater if you use >35 gallons a minute or 10 acre feet of water a year you are required to obtain a permit. A definition of an acre foot of water is one acre(43,560 sq ft)one foot deep. It translates to 325,851 gallons of water. Your welcome for the science lesson!
Bottom line, water is a very complicated issue for Montana Ranches and Farms and will continue to get more complicated and probably at some point the right will have to be defended. There is tremendous value in existing water rights because of the complications and difficulties in getting new water rights. The term water is the new oil is something we will start hearing more and more. This is why when we have a Montana Ranch for Sale with water rights or are representing a client that is purchasing a Ranch for Sale in Montana with water rights we strongly suggest bringing an attorney to review and give an opinion on the water rights. This can become very political and the Montana water right attorney is versed in working his way through the winding and twisted road of water. It does not hurt to also talk to the correct Montana government agency just to see what knowledge you can receive from them.
The EPA proposed Clean Water Act complicates things even further. The EPA is interpreting what use to be termed as navigable waters to now being any standing water that they want control over. So a ditch that holds water would now potentially come under EPA ownership and supervision. This is an unprecedented power grab and always with the government is about power and another way to generate tax revenue. This could be devastating to Montana Farms and Montana Ranches adding additional regulations and costs to already heavily regulated industries and small family businesses. I will definitely expound on this further in another article but ranches for sale in Montana will definitely be impacted in years to come if this legislation is allowed to happen.
Resources for Information on Montana Water Rights
Here are some resources for water rights in Montana that were used in writing this article.
http://mbmggwic.mtech.edu/ (Montana Ground Water Information Center)
If you are looking to sell or purchase a Montana farm or ranch with water rights it is important for you to get an adequate return on your investment. Those who have water rights in the future could make substantial returns as populations continue to put more demands on our water resources. A Montana farm or ranch could be a nice income generating asset in an overall balanced portfolio and brings great recreational opportunities and fabulous memories. If you would like to discuss your situation we would love to have a conversation. We can be reached at:
Buzz Tatom-Venture West Ranches