Judge overturns water rights decision for proposed Broadwater County subdivision

A district court judge in Broadwater County handed a victory to a group of water rights holders and landowners on the east side of Canyon Ferry Reservoir in a decision the plaintiffs say could have broad impacts to water rights and subdivision development in Montana.

District Court Judge Michael McMahon’s 85-page order issued Feb. 14 is sharply critical of the Broadwater County commissioners and the Department of Natural Resources and Conservation.

McMahon hit the county for its preliminary approval of the Horse Creek Hills subdivision proposed by developer 71 Ranch despite an environmental assessment that failed to account for multiple water and natural resources impacts, and the DNRC for what he said was the department’s ignoring Supreme Court precedent surrounding water rights exemptions for subdivisions.

“The economic impetus to develop land is overwhelming and relentless. If there is going to be any check on uncontrolled development of Montana’s limited water resources it will have to come from DNRC which is statutorily charged with fulfilling Montanans’ constitutional right to ‘control, and regulation of water rights,’ … a duty DNRC has manifestly avoided or undermined for over a decade to the detriment of our waters, environment, and senior water rights holders whose protection is the ‘core purpose’ of the Water Rights Act,” McMahon wrote in his decision.

Water advocacy organization Upper Missouri Waterkeeper and a group of residents living close to the proposed subdivision in August 2022 challenged Broadwater County’s approval of a preliminary plat for the House Creek Hills subdivision made a month earlier, as well as the DNRC’s approval of the project to move forward as four separate phases that allowed each phase its own exempt well instead of the full project having one exempt well — a scheme the judge found could lead to a limitless number of non-permitted wells in Montana.

Vicki Sullivan, a resident whose comments to the county were cited multiple times by McMahon to underscore how citizens led the effort to rightfully oppose the determinations surrounding the project, said the win was a victory for people living nearby but also for all Montanans opposed to sprawling new developments taking up water resources.

“Montana citizens now have a clear roadmap for holding their local decision-makers and state agencies accountable, ensure they consider public and community comments, proactively identify negative impacts related to new sprawl development, and deny new subdivisions that do not have adequate water supplies,” she said in a statement.

The proposed subdivision is on the east side of Canyon Ferry where Lower Confederate Creek runs into the reservoir, and involves subdividing 442 acres of land into 39 residential, two commercial and one open space lot – built out in four phases, with each lot served by an exempt well, septic and stormwater system.

The DNRC signed off on water exemptions that allowed each of the four phases of the proposal an appropriation of up to 10 acre-feet per year for a total of more than 13 million gallons across all four phases, according to court filings.

When it came time for the county to consider the proposed subdivision, it went back and forth between commissioners and the county planning board. Several locals, including some of the plaintiffs in the case, objected to both the process and the lack of information about water quantity and quality, or impacts to wildlife or nearby landowners.

McMahon found the county was “bending over backwards” to allow the ranch owners multiple opportunities to correct errors in its application, and found that the materials were not organized or clear enough for the public to understand and comment on in violation of the law.

He found the environmental assessment for the proposal, as well as the review of the impact to water users close to the proposed development, did not include information about impacts required by law, nor did it consider decreasing water abundance on Confederate Creek.

“The environmental assessment includes only the barest information about water resources; omits necessary information about waters’ health and interaction; fails to consider the impact of exempt wells; and arbitrarily limits its analysis to only the property itself and not neighboring landowners and waters,” McMahon wrote.

McMahon’s opinion says when residents raised these numerous concerns, the county ignored them and did not provide the court records of some of the most serious issues with the proposal that were raised.

“Ignoring numerous specific, documentable, and clearly defined impacts is arbitrary and unlawful when statute requires that the county review them,” McMahon wrote.

He said the county, in violation of the law, failed to review whether there was sufficient water for the proposal.

McMahon also found that the DNRC wrongfully used an internal memo for its legal guidance in determining when it can allow groundwater development without considering impacts for existing water rights holders — instead of a Supreme Court decision surrounding the definition of combined appropriations.

“DNRC blatantly ignores a recent Supreme Court holding, which the letter demonstrates that DNRC understands, to conclude that each of the four phases of one larger project are entitled to exempt wells,” he wrote. “This is contrary to the administrative rule, statute, the rulings of this and the Montana Supreme Court, and perhaps most troubling, DNRC’s own restatement of the law in the letters.”

He said the DNRC’s claim it only had limited information at the time that the four phases would be one project was not plausible and suggested that like the county, “DNRC insists on doing 71 Ranch’s job.”

He said it was “blackletter law” that multi-phase developments are one combined appropriation, and that if the DNRC used its own interpretation, it “allows projects with an infinite number of exempt wells so long as they are developed in small enough sequential phases, a decision DNRC’s interpretation places entirely in the hands of the developer.”

McMahon put a section in bold in his opinion, stating that he wanted to make his ruling “absolutely clear” because the exempt well law “seems a particular challenge” for the department.

“There is no basis in law for DNRC to treat the four phases of 71 Ranch’s subdivision project separately, a conclusion which is absolutely clear from statute, administrative rule, Montana Supreme Court precedent, and even DNRC’s letters in this matter. Any and all phases of this project are one single combined appropriation,” he wrote.

McMahon said that DNRC’s efforts to evade the Supreme Court’s ruling were “limitless” and that the department “flagrantly ignores it in practice.”

“DNRC gives the distinct impression of a misbehaving child who knows how to say the right words to end the chastisement and yet immediate(ly) returns to the proscribed behavior once out of view,” McMahon wrote.

He said he worried that in a decade, district courts will be reviewing similar approved applications for separate projects sited next to each other that are being built by one developer through shell companies.

McMahon also noted that eight years ago, there were an estimated 113,000 exempt appropriations, with up to 78,000 more by 2020. Doing the math, McMahon said, the exemptions could lead to billions of gallons of water being used with no permit required.

“With DNRC going out of its way for decades to conclude that such wells are virtually never combined appropriations, each well is entitled to appropriate 10-acre feet per year, totaling 1.2-to-1.9-million-acre feet, or 417-622 billion gallons of water each and every year,” he wrote. “Each additional year adding 3,000 exempt wells entitles their owners to an additional 9 billion gallons of water each year. At this rate, in less than 50 years exempt wells will be entitled to draw a trillion gallons of water each and every year.”

A spokesperson for the DNRC and Broadwater County Attorney Cory Swanson both said Friday they were reviewing the order to fully understand the implications before speaking further or making any next moves. An attorney representing the ranch did not immediately respond to an email seeking comment and asking about a possible appeal on Friday.

Guy Alsentzer, an attorney for the plaintiffs, called McMahon’s decision a “landmark judgment.”

“This victory is not only a vindication of the rights of citizens to lawful, science-based decision-making and accountable government in the face of unrelenting development pressure, but importantly, this landmark judgment also recognizes the incredible determination and grit of individual citizens who – for nearly two years – tirelessly showed up to hold their elected leaders and bureaucracy accountable to protect their water, their treasured farms and ranches, their wildlife, and their western way of life,” Alsentzer said in a statement.