Montana Water Rights-Value for Montana Farms & Ranches

One of thousands of beautiful streams or rivers that holds Montana water rights for the people that own the land.
 
Updated November 8, 2017

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. As many say in the investment industry, “water is the new oil.” 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 for a property. It is a critical issue that you want to be sure of when purchasing or selling.

General

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 controlled by two different agencies depending on the date of the permit:

  • Adjudication Bureau – Prior to 7/1/73
  • New Appropriations Program – On or after 7/1/73

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 the Montana DNRC. The DNRC evaluates whether the application meets requirements of statutes, rules and regulations. If  the DNRC sees the proposal meets the requirements, it is deemed Correct and Complete.

After reviewing the factual and legal basis of an application, the DNRC will make initial findings and publish a Notice. If there are no valid objections that are raised, then the Permit is issued. However, notice key vague words throughout the permit regarding your 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 ownership granted. Therefore, I believe it will become more difficult to acquire water rights in the future. The Permit describes the Appropriation. The owner has to show Proof of Perfection. Once the permit is perfected it shows appropriation has been put to beneficial use as described by the 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. For these rights there are no recordings, 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, the rights could be extremely valuable. 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. These rights are recorded, approved, and possess a written record of the right. 

For those coming from out of state, you can’t assume that water rights are the same from state to state. 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 nonuse. Montana does not recognize Riparian rights. Therefore, Montana water rights have limits stemming from the Priority Date and can be lost by nonuse.

Water Rights Agencies

There are a number of agencies in Montana that play a role in administering water rights. They are the:

  • DNRC
  • Montana Water Court
  • District Courts
  • Reserved Water Rights Compact Commission
  • Attorney General
  • Water Policy Interim Committee
  • Environmental Quality Council (EQC).

The DNRC comes into play on water uses after the July 30, 1973 date. They have records of all permits, changes, certificates and water reservations after July 30, 1973 and for all water rights 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, 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. 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 the 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.

Recreational Uses of Water Rights

Montana water rights do not only impact agricultural and domestic use. Tourism also capitalizes heavily on the use of water rights. Revenue brought in from tourism coming from fishing, sightseeing, and recreation would be heavily impacted by overuse of water in Montana. Thus in 1969 the Legislature gave Montana Fish and Game the authority to oversee water flows in 12 streams for the preservation of fish and wildlife habitat. The streams include the:

Montana water rights on the flathead river

  • Big Spring Creek
  • Blackfoot River
  • Flathead River
  • Middle Fork of the Flathead River
  • South Fork of the Flathead River
  • Gallatin River
  • West Gallatin River
  • Madison River
  • Missouri River
  • Rock Creek
  • Smith River
  • Yellowstone River

 

Many of these rivers are also Blue Ribbon Streams that every fly fisherman has on their bucket list. They deserve to be protected for current and future generations. Water rights are one way of helping protect these fisheries from overuse and contamination. 

Federal/Tribal Lands 

Another complication is the Montana water policies on federal lands and tribal lands.  This is handled by Montana’s Reserved Water Rights Compact Commission (RWRCC). Claims by tribes for water rights depend on what the use of the land was originally intended for. All claims have to be approved by the state of Montana, Tribal Councils and the Federal Government. There are seven Indian reservations that have claims for water rights. The federal government also has claims for National Parks, forests, wildlife refuges, and designated wild & 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. Water rights are granted on proof of beneficial use. Beneficial use falls within the following categories: 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.

Requirements for the Need of Water Rights

Adding additional permits would lead to the overuse of these tributaries. 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/year, you are required to obtain a permit. A definition of an acre foot of water is one acre (43,560 sq ft) x one foot deep. It translates to 325,851 gallons of water. Your welcome for the math lesson!

Bottom line, water is a very complicated issue for Montana Ranches and Farms and will continue to get more complicated. At some point the rights will have to be defended. There is tremendous value in existing water rights because of the complications and difficulties in getting new water rights. 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 the document. It does not hurt to also talk to the correct Montana government agency just to see what knowledge you can receive from them.

EPA Clean Water Act

The EPA Clean Water Act complicates things even further. The EPA is defining the term ‘navigable waters’ to include any standing water that they want to control. So a ditch that holds water would now potentially come under EPA ownership and supervision. This is an unprecedented power grab and, as always, is about maintaining power and generating tax revenue for the government. This could be devastating to Montana farms and 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://dnrc.mt.gov/divisions/water/water-rights/docs/2014-water_rights_in_mt_handbook.pdf

http://dnrc.mt.gov/divisions/water/water-rights

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 bring great recreational opportunities and fabulous memories. For additional information about what types of ranches may need water rights, check out our article about Montana Ranches for Sale. Another valuable resource is our blog about Types of Montana Land for Sale. Here you can find examples of some properties that have water rights. If you would like to discuss your situation I would love to have a conversation with you.

 

About Buzz Tatom

 Sales/Partner

Buzz Tatom 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 the ranch on to the next generation or planning for eventual sale, his talents and contacts help save clients money and navigate complicated transactions.

Montana Water Rights-Value for Montana Farms & Ranches

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He still owns the 5T Ranch in Texas but now calls Big Sky, MT home. His background in Texas included finding run down ranches and rehabilitating them into show place properties. From building lakes, stocking fish, to managing for wildlife he has a proven record of increasing values of properties that have given families great memories and returns.

His successful business background allows him to have good knowledge in contracts, dealing with people and has a wide variance of knowledge from his experience in dealing with oil and gas companies on his properties to manufacturing background to knowing who to call to get answers.

He has a BBA from Texas Tech University and got his MBA from Southern Methodist University. While at Texas Tech, he played football and was a 3 year starter as a Tight End. He bought into a Printing company at the age of 24 and grew it ten fold by the time it was sold in 2011.

Buzz teaches part time at Montana State University and loves mentoring students. He has been married to the love of his life, Kathy Tatom, for 25 years and has one son(Tate) and 2 daughters(Sayler and Emmy).

His hobbies include hunting, fly fishing, improving the 5T and following his son Tate in his golf career at the Air Force Academy. His life is divided between family, volunteering, teaching part time at MSU and Church.

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