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Montana Water Rights

31 Mar
Buzz Tatom March 31, 2018 0

Basics on Montana Water Rights

Montana water rights has become a hotbed issue and we are still early in the game of Montana water. I have had several investors approach me about purchasing real estate to gain Montana water rights, or purchase water rights outright and separate from the land. Farmers and ranchers in Montana know that water rights hold value, but many are unaware of just how much their water rights in Montana can change the value in the next 10 to 20 years. All we need is a shortage in other areas of the country to see a significant value change for Montana water rights.

First thing, we do not hold ourselves out as an expert in Montana water rights or any other state. As a real estate broker, we always advise and request our clients hire a water consultant or an attorney that specializes in Montana water rights. It will cost money, but with the adjudication process of Montana water rights, the historically inaccurate measurement of water usage, and a hundred other factors, verifying water rights is critical. I know, I know, I don’t like spending money either but this will be money well spent. You will also learn a great deal in the process of what you own and what the requirements are to keep your rights. It is a complicated issue with lots of gray areas and a lot of disagreements between parties. The old rancher adage of steal my wife but don’t steal my water holds true even today.

 

Severance of Montana Water Rights

Similar to mineral rights, water rights in Montana can be severed from the land or real estate. That may be a surprise to many reading this article because we often think of water rights being attached directly to pieces of property. With the possibility of severance, water rights become a much more dynamic and fluid investment. Montana water rights values can then be sold or kept separate from the land estate.

If a seller wants to separate Montana water rights from a property, they would need to specifically spell out the severance in a contract. If not held in reserve, the water rights go with the land just like a normal transaction.

 

Why would someone sever water rights from the land?

If a ranch or farm is being sold, the Montana water rights are a big portion of what makes the land valuable. Not only that, water rights are often vital to the operation of any farm or ranch because the water is used for stock water or irrigation. One example of why severance is beneficial would be a developer purchases land with water rights along a stream or river and is subdividing the land into smaller parcels. The water rights will not hold their value for the smaller parcels since most will be drilling wells and getting water through groundwater. In such a case, the water rights could be severed and sold to another user such as a municipal, or adjacent farmers or ranchers. It is a way for the developer to increase his returns, prevent hurting the development, and assist the next user of the water rights.

 

Types of Montana Water Rights

This is the tedious definition, explanation, and rules part that no one is going to accuse of being a book they can’t put down. However, the  Water Rights Handbook gives you important information that you need to know.  This can help you keep a right, obey the rules, or help you find a ruling that can help you establish or add to water use on a property. If there is one thing I have learned, it is that most people don’t want to read through the rules.  I have also learned the ones that do usually know how to use it to their advantage.

 

Pre-1973 Montana Water Rights

Water rights that are established before the July 1, 1973 deadline of the Water Use Act are often referred to as pre-1973 water rights. These pre-1973 water rights are either use right or filed rights depending on how they were established.

Use Rights

The vast majority of Montana water rights that were established before the Water Use Act deadline were use rights. Use rights are water rights that were acquired through the appropriation and beneficial use of water. The priority date of use of the water rights is almost always the date the water was first beneficially used.

Filed Rights

Although optional, filed rights are Montana water rights that were filed at local county Clerk and Recorder’s offices. The system was first recognized in 1885 and ran until the Water Use Act installation date. Filed rights have a little bit more legitimacy than use rights because of their documentation, but provide no additional benefits compared to use rights. In 1969, the Montana Fish and Game Commission was granted authority by the Montana Legislature to appropriate unappropriated waters on 12 streams in order to preserve fish and wildlife habitat.

 

Federal Reserved and Indian Reserved Water Rights

Montana’s Reserved Water Rights Compact Commission (RWRCC) is the entity, established by the Montana Legislature in 1979, responsible for negotiating settlements with federal agencies and Indian tribes. Federal agencies and Indian tribes are able to claim federal reserved water rights. These are rights to use water that has been authorized by an act of Congress, a treaty, or an executive order. The use volume of the water right depends on the original purpose the land was reserved for.

 

New Appropriations

Overseen by the DNRC, the new appropriation of surface or ground water is required for water rights to be established after June 30,1973. To get a Certificate of Water Right, you must be granted a permit to appropriate water or file a Notice of Completion of Ground Water Development. The water must be used beneficially which includes using it for domestic, stock, irrigation, lawn and garden, mining, municipal, industrial, commercial, agricultural spraying, fisheries, wildlife, and recreation.

If there is a change in use the DNRC comes into play and the negotiations begin. Say your right is for flood irrigation and you want to change to a pivot, the DNRC will need to be involved and there is a strong possibility they could change the amount of water that can be used. Changes in window of use also will involve the DNRC. Basically, if it is a new use or a changed use the DNRC will need to be involved.

 

Surface Water

Appropriating surface water often requires diverting water or the construction of diversion works. Before diversion or the construction of diversion works starts, a person must apply and be granted a permit to appropriate water. The permit process for surface water can take some time to complete, so make sure you plan ahead. The permit requires the following:

  • Physical access and availability of water at the point of diversion for the specified period
  • Demands on the water source
  • A comparison between water availability and existing legal demand.
  • The implications of use on other water rights.
  • An analysis of existing water rights and their impact on water supply of the specified water source.
  • The operation and design of the new extraction system.
  • Description of the beneficial use of the water.
  • The requested flow rate and volume and an explanation of the required amount necessary for use.
  • The applicant has interest in possessing the use at the water source.
Exceptions

Small livestock pits or reservoirs on nonperennial flowing streams, streams that cease to flow for a portion of the year, are not subject to this law. Some other exceptions include pits or reservoirs that:

  • Hold less than 15 acre-feet of water
  • Have an annual appropriation of less than 30 acre-feet
  • Are located on a piece of land 40 acres or larger

These reservoirs and pits can be constructed immediately without first obtaining a permit. However, within 60 days, of completion of construction, an application for a Provisional Permit for Completed Stockwater Pit or Reservoir must be submitted to the DNRC. This allows the applicant to construct and operate the stockwater until the DNRC has time to review the application. The provisional permit is subordinate to all prior water rights. Therefore, if the new stockwater pit or reservoir affects prior established water rights, the DNRC can alter or completely revoke the permit. This can render the construction and water use illegal.

 

Ground Water

Ground water is another form of new appropriation that may require a permit before use. Using more than 35 gallons per minute or 10 acre-feet per year, you will be required to obtain a permit before development or appropriation occur. In a ground water area, an area that focuses on one distinct source of ground water, a permit may be required before the appropriation of water, regardless of gallon per minute flow or acre-feet per year. If you are wanting to develop a ground water well that uses 35 gallons a minute or less and does not appropriate more than 10 acre-feet per year, you do not need to file for a permit. These are called exempt ground water wells.

When a well is drilled, a Well Log Report is completed by the well driller and submitted to the Bureau of Mines and Geology. Once the well is used, the owner must submit a Notice of Completion of Ground Water Development and a filing fee to the DNRC. Once the DNRC receives the form, the priority date of the water right is set. The DNRC will review the application and as long as the owner has exclusive property rights, DNRC will issue a Certificate of Water Right.

This is probably one of the easiest ways to add Montana water rights and if you have shallow ground water it is likely that you will always have the use of water. Very little upfront regulation and once you are done, you fill out the paperwork and have very little red tape. We have found the DNRC office to be very helpful in walking clients through this process of adding Montana water rights.

 

Controlled Ground Water Areas

Controlled ground water areas are areas designated to protect the quality and quantity of water. Overall, the law prohibits wasteful use of ground water. If a wasteful use is found, a controlled ground water area may be established. A proposal for a controlled ground water area can be initiated by the DNRC, a petition by a state or local public health agency, municipality, county, conservation district, or local water quality district. If one-third of water rights holders purpose a petition for a controlled ground water area, it will also be considered. A petition must contain the analysis of a hydrogeologist, qualified scientist, or a qualified and licensed professional engineer that identifies one of the following criteria is met.

  • Present or future depletion or recharge of the aquifer(s) in the controlled ground water area will result in the decline of ground water to levels that prevents water rights holders from exercising their rights.
  • Present or future ground water withdrawal of the aquifer(s) in the controlled ground water area will result in the decline of surface water to levels that prevents water rights holders from exercising their rights.
  • Ground water, present or future, withdrawal from the aquifer(s) in the controlled ground water area have or will create or change the migration of contaminants that will result in the water exceeding water quality standards.
  • Present and future ground water withdrawal from the aquifer(s) in the controlled ground water area have or will reduce ground water quality below water quality standards and prevent water rights holders from exercising their rights.
  • The ground water in the controlled ground water area is not being used beneficially.
  • The current or future use of the ground water will become a risk to public health, welfare, or safety.

 

After Receiving the Petition

Once the DNRC receives the petition, they will either deny, further study, or implement the proposed controlled ground water area. If a controlled ground water area is granted and becomes permanent it may include the following controls:

  • Prevent the appropriation of new ground water
  • Restrict future appropriations by flow, volume, purpose, aquifer, depth, water temperature, water quality, density, and other criteria.
  • Require the measurement of any future ground or surface water appropriations
  • Require a notice on land records to inform potential property holders of the permanent controlled ground water area.
  • Impose space restrictions on wells.
  • Mitigation of ground water withdrawals.
  • Water Quality testing.
  • Require data reporting.

At present, there are 15 controlled groundwater areas across Montana. The complications go up in these areas but so does the value of the Montana water rights in these closed basins. These areas are where you see the multi-bagger returns much of the time.

 

Stream Depletion Zones

As of 2013, the DNRC was granted the ability to create stream depletion zones. Using hydrogeological modeling, the installation of ground water wells in these zones would deplete the stream to certain levels at certain times. In stream depletion zones, any new ground water wells may be limited to only 2 acre-feet per year and a maximum flow of 20 gallons per minute. Another regulatory action is to determine whether the ground water rights are affecting senior surface water rights, therefore making the ground water right subordinate to the senior surface water rights in the zone.

A stream depletion zone can be established by the DNRC, a municipality, county, conservation district, local water quality district, or an owner that has possession of at least 15% of the flow rate of the surface water rights on the affected stream. A hydrogeological assessment must be done on the proposed depletion zone by the Ground Water Investigation Program, a hydrogeologist, or a licensed professional engineer. Being aware of whether your property or proposed future water rights are subject to stream depletion zones is critical. The last thing you want to happen is to be regulated if not prevented from accessing water once you have an operation established.

 

Replacement Wells

Sometimes, an existing well fails and a new well must be drilled in order to access vital ground water. To retain the priority date of the old well and change the water right, a Replacement Well Notice must be submitted to the DNRC. The notice must meet a set of requirements before the replacement well is granted.

The old well and new well must not be in a controlled ground water area. If they are located within a controlled ground water area, the replacement well can be established if the development does not restrict replacement wells. Additionally, the old well must be abandoned completely once the new well is established. The new well must have a flow rate volume equal to or less than the old well. The final stipulation is that the new well must withdraw water from the same ground water source that the old well withdrew from.

 

Replacement Point of Diversion

An appropriator may replace the point of diversion of a water right without the approval of the DNRC as long as they meet the following requirements:

  • The current point of diversion cannot be operated because of natural causes or deterioration of diversion infrastructure.
  • It is the only change to the water right
  • The diversion volume is not increased
  • The new point of diversion does not interfere with water rights between the old and new points of diversion or receives written waivers from water rights holders affected.
  • The new point of diversion draws water from the same surface water source and is located as close as possible to the original point of diversion.
  • The old point of diversion is no longer used and the new point replaces the old point of diversion.
  • It can be shown that the old point of diversion has been used in the past 10 years.
  • The new diversion will not increase the access to, or amount of water used or change the form of irrigation the water is used for.

The appropriator has 60 days after creating a replacement point of diversion to file a notice with the DNRC.

 

Combined Appropriation

When an owner wants to combine the appropriation of two or more exempt wells or springs that draw water from the same source, a permit for appropriation must be granted. The permit is required if the combination of the wells and springs exceeds 35 gallons a minute or 10 acre-feet per year.

However, there are different rules for combined appropriations depending on their start date. If a project, development, or subdivision existed or submitted an application before October 17, 2014, the 1993 rule applies. This rules states that only wells physically manifold together are considered a combined appropriation and subject to the under 10 acre-feet per year and 35 gallons a minute requirements. If a project, development, or subdivision starts after the October 17, 2014, they are subject to the 1987 rules. These rules state that wells do not need to be physically manifolded in order to be considered a combined appropriation.

The average standard that the DNRC uses when making its pre-determination is the use of .28 acre-feet per household, which would allow for about 35 houses in a subdivision. The DNRC will not accept applications with proposed per house estimate less than .28 acre-feet per house unless it has been approved by the DEQ.

 

What is Classified as a Subdivision?

The definition of a subdivisions with pre and post October 17, 2014 start dates, consists of a combination of lots that are individually 20 acres or less. The following criteria for are two or more wells from the same source that cannot exceed 10 acre-feet per year or 35 gallons per minute.

  • Two or more wells physically manifolded together are always considered a combined appropriation.
  • Any lots less than 20 acres that are a part of a subdivision with an application submitted on or before October 17, 2014, are grandfathered in and the 1993 rules apply.
  • Lots greater than or equal to 20 acres existing before or after October 17, 2014, are subject to the 1987 rules. Wells within 1,320 feet of each other on the same lot are considered to be a combined appropriation. If there are any new 20+ acre lots in addition to the original subdivision, they are not considered part of the subdivision and are not required to share the 10 acre-feet limit.
  • Any subdivision created after October 17, 2014 or an application submitted after that date is a combined appropriation that must receive a pre-determination from the DNRC that evaluates and states that all of the exempt wells for the subdivision will stay at/under a combined 10 acre-feet appropriation.

 

Appropriations >3,000 acre-feet

As of July 1, 1991, the DNRC may not approve appropriation permits of ground water greater than 3,000 acre-feet per year. This does not apply to appropriations for municipal use, public water supplies, or by an applicant that irrigates the cropland they own and operate. The applicant must submit a petition to the DNRC. Once the DNRC verifies the permit, it is then passed to the state legislature. In order to be granted a water right that allows the appropriation of more than 3,000 acre-feet, the legislature must uphold the decision made by the DNRC after one or more public hearings.

 

Appropriations in Closed Basins

The state of Montana has closed several river basins from new water appropriations and water rights because of over appropriation and the concern for protecting existing water rights and fisheries. Under 85-2-319 of the Montana code, legislature can rule out, reject, or alter the conditions of permit applications in order to protect the river basin, the rights of senior water rights, or poses a threat to environmental quality.

A proposal for a new appropriation of ground water in a closed basin must be accompanied with a hydrogeological report. If the hydrogeological report discovers that there will be no net depletion of surface water, the permit application will go through the permitting steps. If there is a net depletion of the surface water, the DNRC will determine if the depletion will negatively impact prior water rights. Negatively impacting prior water rights will require the applicant to submit an aquifer recharge or mitigation plan. If there is no impact, then the application proceeds.

For a full list of Controlled Groundwater Areas, Administrative Rule Closures, Department Ordered Closures, Legislative Closures, and Compact Closures, visit the DNRC’s Montana Basin Closures and Controlled Groundwater Areas Report.

A map of the closures can also be found here: http://dnrc.mt.gov/divisions/water/water-rights/docs/new-appropriations/wrb_closurescgwas.pdf

Ten basins have been closed by rules through petition. The DNRC closed Milk River basin, six basins have been closed by legislative action, and compacts have closed portions of 34 other basins.

 

Leasing Montana Water Rights for Road Construction

Often times road construction and dust control require the use of water. Individuals who own a Montana water right can lease their water to Montana road construction contractors. In order to be in compliance with the law, the following must be met:

  • The lease can run for a maximum of 90 days and can divert up to 60,000 gallons of water per day or the amount of the water right, whichever is less.
  • All combined short-term leases cannot divert more than 120,000 gallons per day for a single project.
  • The DNRC does not need to approve the lease, but the lessee must publish a notice or mail all affected personnel affected by the water lease 30 days before the project begins.
  • The lessee must submit a copy of the aforementioned notices and lease agreements to the DNRC at least 2 days before the use of the water.

Leasing a water right for road construction can be a great additional revenue generating opportunity for any property with water rights.

 

Temporary Permits

Temporary permits are granted to users who want to appropriate water for a limited period. Often, temporary permits are used for oil and gas exploration or highway construction. To acquire a temporary permit, applicants must provide all the information a normal permit requires. Temporary permits have expiration dates that determine the end use of the permit and the water that accompanies it.

 

Interim Permits

Sometimes, interim permits are granted to applicants to appropriate water while their application is pending. This allows the applicant to construct and use water while their final application awaits acceptance or denial. Upon denial, appropriation must stop immediately. This can be a tough situation upon denial for the user.

 

Water Reservations

Water reservations are provisions granted only to the State of Montana, political subdivisions, state agencies, or the United States and its agencies. The DNRC is in charge of water reservations and the applications for them. Water reservations are established to maintain minimum stream flows, protect water quality, future beneficial use, and fish and wildlife protection and conservation.

 

Instream Use and Leasing

During times of drought, consumptive water rights for irrigation, domestic use, or other consumptive uses, threaten fisheries. For this reason, the Montana Legislature created laws to allow water originally specified for consumptive use to be temporarily transferred to instream use. While this can bring hardship to users the effect of losing fisheries could be staggering to the Montana economy. Converting a portion or all of a consumptive right to instream use can be another revenue generating opportunity for your property.

Montana Water Rights are a valuable asset to any Montana farmer or rancher

 

Montana Water Rights History

Let’s start from the beginning on Montana water rights. If you have a water right it does not mean you own the water. The state of Montana owns all water whether it comes from surface, underground, flood, or atmospheric sources. This is spelled out in the Constitution of Montana under Article IX. However, what you do get with a water right is the right to use the water.

Montana water rights are based on the prior appropriation doctrine, which states that first in time is first in right. This means the first person to use the water in a beneficial way has established that water right and has the first chance to use it in the future. This doesn’t mean you can hold water above what you need for your beneficial use. Beneficial use means that the water must be used in a way that benefits the appropriator, other persons, or the public. These uses included but are not limited to, agriculture, stock water, domestic, fish and wildlife, industrial, irrigation, mining, municipal, power, and recreational uses.

In 1972, the Montana Constitutional Convention recognized that the regulation and record keeping of water rights were broken and needed to be resolved. They started by acknowledging all existing rights that originated before July 1, 1973. You can bet there was a rush to establish existing rights before July 1, 1973! Use rights, decreed water rights, and filed rights were all made equally valid, which upheld the prior appropriation doctrine and over 100 years of precedent. Next, the convention charged the Montana Legislature with providing administration, control, and regulation of water rights and establishing a centralized record system. The Legislature enacted Title 85, Chapter 2, MCA, commonly referred to as the Montana Water Use Act.

 

Montana Water Use Act

The Montana Water Use Act changed future water rights administration in five ways.

  1. Water rights existing before July 1, 1973 were to go through the adjudication process and be finalized through the state courts.
  2. A permit system for new or additional water rights was established.
  3. Changes in water rights were now to go through a system that had to be authorized and validated.
  4. Instead of county recordings of water rights a new statewide centralized system was established for continuity and access to the rights.
  5. Future use and instream water flows were established to ensure water quality and to protect wildlife and fisheries. This system was to protect a water reserve for future consumptive, fishery, and wildlife use.

 

Administration

Seven state entities now play a role in administering water rights in the state of Montana. The entities include the Montana Department of Natural Resources and Conservation (DNRC), the Montana Water Court, The District Courts, the Reserved Water Rights Compact Commission (RWRCC), the Attorney General, the Water Policy Interim Committee (WPIC) and the Environmental Quality Council (EQC).

 

Department of Natural Resources and Conservation

The DNRC administers and regulates all the water uses established after June 30, 1973. They train water commissioners who measure streams for water rights. They are also in charge of a central records system for all permit changes, certificates, and water reservations dated after June 30, 1973. Montana DNRC water rights are centrally located with search functions to locate owners, types of rights and quantities and time of use.

 

Montana Water Court

The Montana Water Court is tasked with adjudicating Montana water rights claims that existed before July 1, 1973. The court decides on legal issues that may arise in the processing of permits, change applications, or disputes filed by the District Courts. The District Courts can issue the stoppage of water use until a decision is made by the Montana Water Court on water rights issues.

 

Attorney General

The Attorney General can intervene on behalf of the state in any adjudication of water rights claims that are being processed by the Water Courts.

 

Environmental Quality Council

The EQC:

  • Updates and advises the Legislature on developments that pertain to water rights
  • Acts and oversees the policies of the DNRC and any other organizations that deal with state water.
  • Is the direct communicator to the public on water policy.

 

Water Policy Interim Committee

The WPIC coordinates with the EQC to avoid overlapping efforts. The WPIC oversees the study of Montana water policy and looks for any new amendments to current or purposed policies.

 

Adjudication of Pre-1973 Montana Water Rights

Adjudication is the process of formalizing a decision about a problem or disputed matter. Therefore, the adjudication of Montana water rights is the process of formalizing water rights claims, settling disputes about water rights and usage, as well as water rights ownership and precedence.

When there was a dispute before the July 1, 1973 deadline, it was a tedious process of going back and trying to establish who had what water rights and the amount of water that the user was able to appropriate. This was done through interviews, old aerial photos, canal agreements, filings, carrying capacity, and flow rates of ditches and even examination of electrical bills when irrigation is run by electricity.

Abstracts of water rights or statements of claims, can be helpful but should not be solely relied upon. The abstracts will often represent how many acres the right will irrigate. While rarely entirely false, they have been known to be off on the acreage that the water right will irrigate. Many times when looking at property you will have multiple answers on how many acres a water right will irrigate. Variances of 10-20% are common from what we have seen. A user will many times over use until they are called on it or under use due to many factors such as soil conditions, etc…That is why we always advise clients to hire a water consultant or attorney that specializes in water rights to get a good grasp of just how much water the buyer is entitled to.

 

Why the Adjudication of Water Rights Changed

This antiquated way was one of many reasons that the Montana Legislature enacted the Montana Water Use Act. This required all Montana water rights owners to file their rights with the state and these rights to be validated through a statewide adjudication process. Adjudication was a judicial proceeding to determine the type of right and extent of all water rights established before the July 1, 1973. There were some late filings allowed to some extent after the deadline but those rights were put in more of a junior status after the claims filed before the deadline.

Once the Montana Water Use Act was enacted, the Montana Water Court, assisted by the DNRC, started the adjudication process of water rights and the claims to them that were granted after June 30. 1973. The starting point of the process was in the Powder River Basin in 1973. The DNRC collected and investigated water rights claims for this region, but after six years of intense field work, completion of the adjudication process for the Powder River Basin appeared distant. With 85 different basins in the state of Montana, a new process needed to be implemented.

To remedy this problem, the Legislature passed Senate Bill No. 76 (SB 76) in 1979 which amended the adjudication process from adjudicating one basin at a time to perform a comprehensive adjudication of the entire state.

 

Adjudication by the Montana Water Court

The Montana Water Court is the entity that oversees the adjudication of all Pre-1973 water rights. The Water Court Water Judges, Water Masters, and other personnel are monitored by the Montana Supreme Court. The Montana Water Court is in Bozeman with several regional offices in Billings, Glasgow, Havre, Helena, Kalispell, Lewistown, and Missoula. Regional offices have specified counties that they oversee. The Chief Water Judge is appointed by the Chief Justice of the Montana Supreme Court. The Chief Water Judge supervises all division Water Judges as well as guides the adjudication process across the state. They also assign cases to Water Master, division Water Judges and Associate Water Judges.

 

Adjudication by the Department of Natural resources and Conservation

The DNRC assists the Water Court with the adjudication process by providing information and technical support to Water Judges and persons filing claims. They also help conduct field investigations of claims at the request of Water Judges.

For claims involving Indian tribes and federal entities, the Reserved Water Rights Compact Commission (RWRCC) negotiates on behalf of the Governor. The RWRCC may choose to form a compact with the entity or tribe as a form of adjudication of water rights for these special entities.

 

Adjudication by the Water Adjudication Bureau

A division of the DNRC, the Water Adjudication Bureau, assists the Water Court examining all claims and providing a summary report to the Water Court on each of the basins in the state. As of 2015, the Bureau completed the examination of 57,000 claims and must provide summary reports on the remaining 30 basins by June 30, 2020. As of July 1, 2015, the Bureau is responsible for reexamining 90,000 claims in 44 basins that were previously decreed under old rules instead of under the claim examination rules. The reexamination of these basins must be completed by June 30, 2023. The Bureau reports quarterly to the WPIC and assists the Water Court and District courts in the enforcement of decrees issued by the Water Court.

To see the current Adjudication progress and status for Basins across the state, visit the DNRC’s website.

 

Adjudication

The adjudication of existing Montana water rights was the first and foremost priority for the Legislature and the agencies involved in the claims process. The order of adjudication for basins is determined by a variety of factors, however for a basin to receive adjudication priority it must have:

  • Recurring shortages that result in urgent water right controversies.
  • Federal or Indian water rights negotiations nearing completion.
  • Locations that facilitate efficient use of department and Water Court resources.
  • Proceedings nearing a final decree issuance.

Having a priority order for a basin you have a water right in, hastens the pace at which the water basin and your water rights are declared. So if you have a Senior right that means your right was established before others claims. Claims go well back into the 1800s and I have seen Territorial rights that go back when this was still Lonesome Dove and before times.

In 1979, a Water Rights Order was issued by the Montana Supreme court that required all people claiming existing water rights to file a claim by January 1, 1982 with the DNRC. If a person claiming an existing water right did not file by the deadline, a presumption of abandonment of the right was implemented. The deadline was extended to April 30, 1982, resulting in a total of more than 200,000 claims to the DNRC and Water Courts. A law passed in 1993 allowed late claims to be filed through July 1, 1996 which resulted in 4,500 additional claims. The late claims are lower-ranking, which means that federal and Indian compacts, timely filed claims, and some new rights have precedence over them.

 

Exemptions from Filing a Claim

Exemptions for filing a claim were given to existing water rights claims for livestock and domestic use. These existing water rights used instream flows or ground water sources and were not required to file a claim. However, they could voluntarily file a claim. Exempt water rights that were filed during the adjudication process would be included in the decree of the respective basin. Exempt claims that were not filed, were not included in the decree for the respective basin.

The claims process required the following information from the claimant:

  • Name and Address
  • Name of Watercourse (water source) the right was being claimed for
  • Quantities and times of claimed water use
  • Legal description of the point of diversion and place of water use
  • Purpose of use
  • Number of acres irrigated (if applicable)
  • Approximate date of beneficial use
  • Sworn statement of correctness and truthfulness of the claim
  • Supporting documents such as plats, aerial photos, maps, or decrees.

In order to come to a decree, the final product of a basin adjudication, several stages must be met. The progression through the process to come to a final decree includes the stages of examination, temporary preliminary or preliminary decree, public notice, objections, hearings, resolutions, and final decree.

 

Examination

The first step in the decree process is examination. In this stage, the DNRC evaluates claims to see if they are accurate, complete, and reasonable. If errors or discrepancies are found, the DNRC contacts the claimant to resolve the errors. If an agreement cannot be made between the DNRC and the claimant, an issue remark is placed on the claim. Before a final decree can be issued, all issue remarks must be reconciled. When all examination is completed, a Summary Report is issued to the Water Judge who uses the information to create a basin decree.

 

Temporary Preliminary Decree

When a basin involves reserved water rights for federal entities or Indian tribes that are undergoing negotiations, a Water Judge will issue a temporary preliminary decree. This decree defines all claimed rights except those reserved. Once a compact is closed, it can be included into a preliminary decree.

 

Preliminary Decree

If there are resolved compacts or no reserved water rights, the Water court issues the preliminary decree. This decree is based on claim statements, the DNRC’s Summary Report, and water compacts, if included.

 

Public Notice

Once a temporary preliminary or preliminary decree is issued, a notice is sent to all parties affected by the decree. Along with the notice is information regarding the deadline for objections.

 

Objections

If a claimant has an objection, it is important that the objection is filed. If a claimant fails to file an objection, they may not be allowed to file an objection later. Often, claimants have between 180 to 360 days to file an objection. Objections can be for personal claims, the claims of others in the basin, or if the decree appears to have incorrect information. After the objection deadline, every filed objection is given a notice and a 60-day counter objection period.

 

Hearings

The Water Court will hold a hearing to evaluate all disputes and objections. The DNRC, any person named in the decree, any interested person, or anyone affected by the decree in another basin that is hydrologically connected to the basin being decreed, can object to any portion of the decree.

 

Resolutions

The first step in the resolution process is to resolve all issue remarks. The Water Court reviews all elements of the issue remark to determine if information can be collected to resolve the issue remark or if the issue was simply a clerical error. If the issue cannot be resolved, the DNRC will meet with the claimant to try to resolve the issue in an informal way. Upon resolution, all necessary paperwork will be submitted to the Water Court for final approval. If the issue is not resolved between the DNRC and the claimant, the Water Court will schedule a proceeding to resolve the issue. Following the hearing, the Water Court will release a final decision on the issues and objections.

 

Final Decree

When all resolutions have taken place, the Water Judge issues the final decree. The final decree includes the flow rate, priority date, beneficial use, time and place of use, water source, and place and means of diversion for each water right. The DNRC issues a Certificate of Water Right for each water right and files a copy in their centralized records system.

Water Rights Montana and their value

New Appropriation of Water

The first step in claiming a new water right is to confirm if you already have one that you do not know about. You may have acquired a water right along with the purchase of your land. You may have an existing water right if:

  • Water was previously used on the property before you gained possession of it.
  • The previous owner filed a claim with the Water Court claiming pre-July 1, 1973 use.
  • The previous owner was issued a permit by the DNRC
  • The water right was not reserved in the deed conveying the property to you.
  • The water right has not been abandoned or revoked because of noncompliance or non-perfection.

If a previous water right does not exist, you will have to go through the application process with the DNRC. The type of application you are required to submit depends on the type of water right you are seeking. The different types of water rights can be found at the beginning of this report. The first application form that every applicant must complete is the Application for Beneficial Water Use Permit (Form 600). There are several variations of this form for each specific type of water right. Make sure to fill out the correct form. This application requires:

  • Intended use description
  • Place of use
  • Point of diversion
  • Diversion equipment
  • Supply source
  • Water volume to be used
  • Other requirements specific to each type of water right

 

Submitting Beneficial Water Use Permit

Once the application is submitted with the appropriate application fee, the DNRC reviews it for correctness and completeness. If it satisfies these two criteria, the DNRC will evaluate the application for the proposed water right. The date the DNRC receives the application will be the priority date if the appropriation is granted. If information is incomplete, the DNRC will send a deficiency letter within 180 days of receiving the application. The applicant then has 90 days to make changes to the application or else it will be terminated. If the application is not corrected within 30 days, the priority date will change to the date the application was corrected.

While the application is being processed, an environmental review will be conducted to determine if the water right will impact the environment. If an environmental impact is identified, an environmental impact statement will be required to create a complete and correct application.

 

After the DNRC Makes a Decision

Within 120 days of the DNRC determining the application is correct and complete, they will release a preliminary determination which will tell the applicant if the DNRC is more likely to grant or deny the application. If the preliminary determination is to grant the application it will go to public notice for objections. The DNRC can also add additional conditions to the permit if they see fit.

If the preliminary determination is to deny the application, the applicant can request a hearing where they can provide additional evidence to why the application should be granted. The verdict may still deny the application after the hearing upon which the applicant can appeal to the District Court. If after the hearing, the DNRC decides to grant the application, the preliminary determination will be changed and will be forwarded to public notice.

If a water right application is believed to have adverse effects on exiting water users, the DNRC will notify all who may be affected by the new application. Current users can file an Objection to Application (form 611) with a processing fee, that must explain the effect of the new application on their own rights. If there are no objections, a final permit is granted to the applicant for a new water right.

If there are objections, the DNRC will hold hearings on why the new application will adversely affect existing water rights or the doubt of the new applicant being able to meet the required criteria of the application. The hearing examiner can then decide to grant, modify, or deny the permit. After the decision, objectors have 20 days to file additional exceptions to the proposed decision. If no exceptions are filed or all exceptions have been applied, the DNRC will file a final order.

Receiving your Montana Water Rights

Once an applicant receives the permit, they must then construct the project, appropriate the water, and use it for the use identified in the application. They then must submit a Notice of Completion of Permitted Water Development (form 617) to the DNRC. If the applicant fails to do so, the water right will be terminated. An applicant may submit an Application for Extension of Time (form 607) if problems arise preventing the timely completion of the project by its deadline.

Once the project is completed, the DNRC evaluates the completion notice on the completion of the project, the use of water is correct, and the water basin the permit resides within has been adjudicated. A certificate of Water Right will be issued with a priority date that is the same as the original permit.

 

Changes in Water Use

In Montana, water rights can be changed as long as they meet certain criteria. The place of diversion, use, purpose of use, or place of storage may all be changed. In order to make a change, an Application for Change of Appropriation Water Right (form 606), must be filed and approved by the DNRC. Change proposals must not hurt other water rights, the water must continue to be used for beneficial use, the diversion, construction and operation of the appropriation are in accordance with DNRC rules, and the applicant has access and permission to the new place of use.

The increase in diverted water and consumption that the DNRC will grant is up to the historic amount of water appropriated in the past. This is also where the DNRC might change the amount of water allowed to be used. There is a negotiation process that is gone through. For instance, if your use is going to a more efficient use and can irrigate the acreage with less water, then the DNRC might reduce the amount of water under the right. Applicants must provide information and evidence to substantiate the historic usage amounts.

The DNRC may decide to grant the entire change, a portion of it, or deny it. The process for changing the use of a Montana water right proceeds through the same process as permits for appropriation. Once a change is granted, the appropriator must submit a Notice of Completion of Change of Appropriation Water Right (form 618) to the DNRC.

 

Change Application Requirements

If an applicant submits a change application to change the purpose or place of use for the appropriation of 4,000 or more acre-feet of water per year or 5.5 or more cubic feet per second they must prove that:

  • The change will not adversely affect existing water rights or planned developments where a water permit or certificate has been issued.
  • The diversion, construction and operation for appropriation are adequate with DNRC code.
  • The water continues to be used beneficially.
  • The applicant directly possesses the property where the water is being used or has written consent from the person who owns the property where the water is to be used.
  • The new appropriation is of reasonable use based on current and future demand of water.
  • The new appropriation benefits the state and the applicant.
  • The effects on the quality and quantity of water to be used by other water rights holders does not change adversely
  • The probability of adverse environmental impacts are pursuant to Title 75, Chapter 1, or Title 75, Chapter 20.

If the change application involves transporting water out of state, the applicant must provide the criteria in section 85-2-402(6) and be granted approval by the legislature. http://leg.mt.gov/bills/mca/title_0850/chapter_0020/part_0040/section_0020/0850-0020-0040-0020.html

 

Temporary Change in Appropriation Water Rights

Another change in water use can come from an appropriator being granted the ability to temporarily change their water rights with the approval of the DNRC. An application for Change of Appropriation Water Right (form 606), must be submitted with a Temporary Change Addendum (form 606TCA). These identify the proposed change and the length of time of the temporary change. A temporary change may be granted for a maximum of 10 years but can be renewed for 10 more years. There is no limit to the number of times the temporary change can be renewed. In order for a temporary change application to be granted, the applicant must provide the same information required for a permanent change application.

An example of a temporary change in appropriation is changing a consumptive use right to an instream flow right. This helps with fishery conservation and can be voluntary. The owner may also choose to lease the water right for the purpose of protecting fisheries. The owner still has to submit an application as above, but can capitalize on leasing opportunities or temporary altering an unused consumptive water right to help the environment.

 

Marketing for Aquifer Recharge of Mitigation

As of 2011, water rights holders can change all or part of their appropriation to recharge or mitigate aquifers. The appropriator can lease or sell the portion they wish to be used for recharge or mitigation. The volume and flow rate is then subtracted from the original owner’s volume and flow rate. The changes must be completed within 20 years and the appropriator must notify the DNRC within 30 days each time a portion of the change is completed. The purchaser or lessee must also apply for a Beneficial Water Use Permit.

 

Temporary Lease of a Water Right

Owners of water rights also have the option of leasing their water rights for other uses to lessees. Applicants must fill out a Temporary Lease of Appropriation Right (form 650). The conditions of a temporary lease include:

  • The water right must have been used in the past five years before the lease application date.
  • It can only be leased for the diversion period specified on the Certificate of Water Right.
  • The water right cannot be leased for more than two years every ten years.
  • The maximum volume of a leased water right is 180 acre-feet per year.
  • Only the consumptive portion of a water right can be leased.
  • Point of diversion cannot be changed.
  • Storage cannot be at the point of diversion or at the place of use.
  • While the water is leased, the original place of use must not be used by the owner of the water right.

Temporary leases are subject to objections from anyone adversely affected by the lease.

 

Salvaged Water

Salvaged water is water that has been saved through a water-saving method. Some water-saving methods include lining a ditch to reduce absorption or replacing irrigation ditches with pipelines to significantly reduce evaporation rates. If the appropriator wants to use the salvage water anywhere and for any purpose, they must submit an Application for Change of Appropriation Water Right (from 606), a Salvage Water Addendum (form 606 SWA), and meet all previous criteria required by the DNRC for changing a water right. This provides an incentive for farmers and ranchers to use water-saving methods in order to increase the possible volume of their water rights.

Water rights in Montana can change in use as long as the proper documentation is provided. Owner’s choose to change the use of their water rights if they are altering the operations of their farm or ranch or wish to turn their water right into an additional revenue stream. For example, if you wanted to start a water bottling plant instead of irrigating part of your land you can do that if the DNRC blesses the change. However, you should not count on all changes being treated the same. If you were flood irrigating and you want to change to a water bottling plant you may not get the same amount of water to bottle as you were granted for irrigation. The DNRC would calculate absorption, evaporation, and many other factors to see if the use volume needs to be adjusted to not adversely affect other water rights holders.

 

Montana Water Right Ownership

Becoming an owner of valuable Montana water rights can happen several ways including, filing a claim for a pre-1973 water right, filing for a new appropriation, buying a water right separate from a property, or purchasing a property with an existing water right. Water rights in Montana are transferable, like we said above, and can be severed from the land. The use, location, or point of diversion can also be changed or transferred depending on the situation. Changes usually have to be within the same basin that the original water right is held. For example, you can’t have a water right in Eastern Montana and transfer it successfully to the Gallatin Basin.

When a property is sold, the seller must stipulate whether Montana water rights are to transfer to the purchaser with the land or are to stay with the seller. For this reason, among others, we recommend you use an attorney or legal representative who is an expert on water rights before finalizing a contract. This will ensure that you gain possession for valuable water rights when you expect to. If a water right is to be transferred, it will appear on the Realty Transfer Certificate. Additionally, a fee is required and information on the water rights will be updated by the Department of Revenue and the DNRC. If the fee is not paid, the DNRC will notify the buyer. The buyer has 60 days to pay the fee or risk a penalty from the DNRC.

 

 

Montana Water Rights not Included in the Sale of a Property

If a Montana water right is not included in the sale of a property, a Certification of Water Right Ownership Update form must be completed to finalize the reservation of a water right. Furthermore, the seller must also submit a DNRC Ownership Update Exempt (Reserved) form (form 642). This form must also be submitted if a Montana water right is being severed from a piece of land that is not being sold. When purchasing a piece of property it is critical that you identify whether the water rights, if applicable, are to be transferred to you upon purchase, or if the seller is holding them in reserve for themselves.

 

Using and Protecting your Water Rights

Whether you have a pre-1973 water right or a newly appropriated water right, there are some stipulations in using and keeping the water right. These include following the rules regarding the period of use, the place of use, the type of use, and all other requirements that pertain to specific types of Montana water rights. Some additional stipulations include the beneficial and continuing use of the water. Beneficial use means that the water is put to use for the user, other persons, the public and can include agricultural, domestic, fish and wildlife, commercial, municipal, power and recreational uses.

Secondly, there has to be a continuing use. You can’t establish the right and then not use it. That would be called abandonment and you would lose the water right. This would not apply if water was not available to you in a given time period because senior rights did not leave leftover water for you to fulfill your right. The distribution of water rights in Montana, is a “first in time, first in right” system. This means that water rights with an older priority date, senior rights, have first stakes on appropriating the volume of water they have the right to. Junior rights are water rights that succeed the senior rights and may be exercised once the senior appropriator exercises their right.

 

Conclusion

Montana water rights are changing. The old days of multi- generational ranches with decades of knowledge of water uses and strong neighbor relationships is changing to new owners that don’t live year-round on the property and don’t know their neighbors well. New owners with limited knowledge of Montana water rights and the historical use must rely on water consultants and lawyers who specialize in the verification and establishment of water rights. They also help current owners keep their water rights by making sure they are exercising their appropriation in accordance to their water rights.

This report is to help educate you on Montana water rights. If you are not confused, you should be, because there are numerous rules, exceptions, forms, and agencies that you might have to deal with. What we hope you take away from the report is a general understanding of water rights and an encouragement to dive in and learn about your water rights Montana situation. We have done this for 50 years and still get confused, so what a neighbor, real estate agent, gate checker, water rights commissioner, etc.. is telling you can be woefully incorrect. I’m not saying they are doing it on purpose, but being educated in your Montana water rights and what you can do with them or a knowledge of what you are purchasing, is critical. Those that are the most educated are at a big advantage over those that are just going off what they hear.

Contact the DNRC about Montana Water Rights

I would encourage anyone that has issues or questions on water rights to call the DNRC or go to their office to get explanations. You will find them helpful and knowledgeable. Many times I have thought a property was shut out from water or I was confused on use and having them sit down and walk me through that specific situation and potential uses was immensely helpful. That being said, after talking with the DNRC, you still need to hire a water right attorney/consultant to confirm what you think and have heard.

Having your water right in hand and going and spending a day at the DNRC and Water Court can be incredibly enlightening and educational. It also gives you the knowledge to document what you own for future generations. Water is going to be an increasingly valuable asset in the future and our hopes are that by reading this you will start the journey of knowing what you own or what you are purchasing. If you found this report helpful, I would encourage you to register via email for future informational reports and like us on Facebook for updates. Let us know if we can ever help you in any way! Feel free to contact me at 406.580.4774 or [email protected].

 

If you enjoyed this report, you may also enjoy our 2018 Montana Ranches for Sale Real Estate Report or our 2018 Montana Cattle Inventory Report as well all of our articles that are available here.

 

About the Authors

 

Montana Ranch Real Estate

Buzz Tatom

Partner at Venture West Ranches

Buzz Tatom, a partner at Venture West Ranches, is a ranch owner and has built, run and sold numerous businesses in his career. This gives him a unique background in helping Montana farmers and ranchers navigate the life decisions that we all have to face. Whether it is passing a ranch on to the next generation or planning for eventual sale, his talents and contacts help save clients money and navigate complicated transactions.

 

Connor Mayberry

Digital Marketing and Content Manager

As the Digital Marketing and Content Manager, Connor writes and creates content that compliments the Montana farms and ranches for sale on the website. Check out our articles page for more articles about Montana ranches.

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