Farm & Ranch
Legislature wades into exempt-well debate
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Montana lawmakers are eyeing changes to a loophole increasingly used to facilitate residential development. Opponents say the real estate and building industries are turning water appropriation on its head.
News from Amanda Eggert Montana Free Press
Three years ago, a Bozeman-based engineering firm sent four nearly identical letters to the Department of Natural Resources and Conservation sketching out loose plans for a 41-lot subdivision proposed for a rural, predominantly agricultural landscape along the eastern shore of Canyon Ferry.
The four letters, all sent on the same day, correspond with the four phases of a subdivision proposed by one of Montana’s most politically well-connected families and largest landowners, the Galts. As explained in the letters, the 435-acre Horse Creek Hills subdivision would use exempt wells — so-named because they’re exempt from DNRC permits designed to ensure new wells won’t adversely impact other water users — to supply water to the project’s 39 homes and two businesses.
“The attached layout currently shows four projects, however this letter is only addressing the water usage for project #1 of the 4 total projects,” the first of the four letters reads. “Each proposed project/phase will not utilize more than 10-acre feet of water — per the current DNRC [exempt-well] standards.”
That letter, and the three that followed, closed with a request that the DNRC “provide concurrence” that Horse Creek Hills’ water plan “is in agreement with the DNRC standards for this region.”
A week later, a DNRC employee in Helena replied that the project, as described, did indeed “fit the current rules and laws pertaining to the filing of an exempt water right.”
DNRC issued that preliminary green light largely because Horse Creek Hills is a phased development. Had it been proposed as a single residential project, it probably would have been limited to just one exempt well — not enough water to serve 39 homes and two businesses. The initial “all clear” in hand, the developer, 71 Ranch, proceeded with the Horse Creek Hills subdivision application.
In the three years since that correspondence, the subdivision has garnered intense pushback, largely due to concerns that it will deplete and degrade the rivers, streams and groundwater of the Upper Missouri basin. Opponents of the proposal say it could threaten agricultural operations, dewater a tributary of the Missouri that serves as rainbow trout spawning ground, and add further nutrient pollution to Canyon Ferry, which already suffers from toxic algal blooms.
But the application advanced. After bouncing back and forth between the Broadwater County Planning Board, the Broadwater County Commission and the DNRC, the preliminary plat application for Horse Creek Hills was approved by the county commission last July.
In August, environmental nonprofit Upper Missouri Waterkeeper and five adjacent and nearby landowners sued the DNRC and Broadwater County Commission over that decision, arguing that despite an “unprecedented” volume of opposition, county and state regulators have failed to adequately examine the subdivision’s impacts to water supply, water quality, wildlife and public health and safety.
Welcome to the messy, contentious and uncertain world of exempt wells, a tool developers are using with increasing frequency to secure water in basins where all available surface water rights are already spoken for.
Broadly speaking, developers like the loophole, senior water rights holders disdain it, and regulators approach it with trepidation given conflicting interpretations of how it comports with the 50-year-old Montana Water Use Act, which grants water supply seniority to those with the oldest water rights.
Although there is variation from year-to-year, the trend line for exempt wells drilled in Montana has grown over the past decade. It averages out to about 3,000 wells drilled without a DNRC permitting process per year. Credit: DNRC
Upper Missouri Waterkeeper Executive Director Guy Alsentzer described the exempt-well trend as a “race to the bottom” that will hamper not only water quantity, but also water quality.
“The cost is going to be shouldered by our rivers, our streams, and by those who already depend on that flow and availability of water,” he said.
Exempt wells are also the source of one of the biggest water fights before state lawmakers, who are walking a perilous regulatory tightrope. Legislators are making a concerted effort to increase housing supply in one of the nation’s fastest-growing states by reforming and streamlining permitting processes without running afoul of a constitutional directive to guard against “unreasonable depletion and degradation of natural resources” or by inspiring a knock-down, drag-out fight with agricultural producers.
So far, if a heated hearing on House Bill 642 seeking to change exempt-well permitting is any indication, that tightrope act doesn’t appear to be going well. About 40 people lined up before the House Natural Resources Committee on Feb. 22 to offer testimony on HB 642, which is sponsored by Casey Knudsen, a Republican rancher and real estate agent from Malta.
Knudsen’s bill would do away with references to “combined appropriation,” which puts limits on the loophole to protect existing water rights holders. It also grants larger groundwater allowances for subdivisions that are larger than 20 acres and requires meters to be installed on some wells or developed springs to help DNRC track water withdrawals.
One of HB 642’s proponents is Joceylyn Galt Cahill, who appeared to reference the Horse Creek Hills subdivision when she urged committee members to pass HB 642 to “clarify law and stop unnecessary lawsuits.” (Montana Free Press reached out to 71 Ranch owner Errol Galt and the engineering firm and lawyers working on the Horse Creek Hills development for comment; none responded.)
Other proponents, including representatives of the Montana Realtors Association and the Montana Water Well Drillers’ Association, said HB 642 would alleviate the state’s housing crunch and allow lawmakers, rather than judges, to steer the discussion.
Cory Shaw with the Montana Building Industry Association argued that research has shown that domestic well use is indeed “de minimis” — negligible — in comparison to the agriculture industry’s water consumption and the loss of water through evaporation.
“We feel that we’re spending a lot of time over a de minimis use of water, and we’d like to see this process cleaned up and streamlined… so we can get houses on the ground and people in homes affordably,” Shaw said.
Opponents, including agricultural producers, environmental groups and at least two municipalities, countered that SB 642 will grossly expand the current exemption and allow developers and many existing exempt-well owners to “steal water” from senior water rights holders, who will have little or no recourse if irrigation ditches, domestic wells, municipal water supplies or aquatic ecosystems dry up.
“This is the most anti-ag, anti-private property rights, anti-prior appropriation doctrine bill I’ve seen in more than 30 years working on a policy,” rancher and property rights attorney Hertha Lund told the committee. “This bill is a step toward following in California’s footsteps, which means that money and development trump all else.”
Travis Stuber, a seed potato-grower who farms with water rights secured by his wife’s great grandfather, said he worries that his son will be unable to run the family farm in Gallatin County if those water rights are threatened.
“This bill is a giant loophole that erodes my son’s future and our farm’s future,” Stuber said. “I ask that you vote no on this bill.”
Andrew Gorder, a former Montana Water Court water master and current legal director of environmental nonprofit Clark Fork Coalition, told the committee that the bill is “so riddled with flaws it’s hard to know where to start.”
In a follow-up conversation with MTFP, Gorder said he’s not alone in his struggle to understand how HB 642 would be applied. He said he’s discussed the bill with other experienced water law attorneys and couldn’t reach a consensus on exactly how it would work in practice. “But there was consensus,” Gorder said, “that it’s not good.”
“The way I see it, this is both allowing for additional appropriations of groundwater for existing subdivisions and incentivizing further sprawl into rural, agricultural lands, open spaces,” he said. “I think it’s pretty apparent that this bill is being driven by the development industry.”
HB 642 has a retroactive element that would entitle those who have drilled wells in the last decade to more water, so in addition to revamping its existing well process, DNRC could be tasked with revisiting about 28,000 exempt-well certificates the department has processed since 2014.
In his closing remarks, Knudsen addressed some of those issues, saying it’s time to end “the never-ending cycle of litigation and interpretation.”
“It’s time to stop pushing this off for another two years, which is what we’ve been doing for a decade,” he said. “It’s time we come together to work toward a solution instead of poking holes in every solution that’s actually brought.”
That argument appeared to resonate with Republican members of the House Natural Resources Committee. On Feb. 24, all of the committee’s GOPs, save for Rep. Kenneth Walsh, R-Twin Bridges, voted to approve an amendment that effectively gives House lawmakers another month to debate the measure before running up against a transmittal deadline by adding a fiscal element, a $150 filing fee to accompany exempt-well notices of completion. (The current exempt well filing fee is $125.)
Since that vote, no additional committee action has been taken on HB 642, which has more than 60 GOP co-sponsors, and there are no additional amendments available for review. The current transmittal deadline for bills with a fiscal element is April 3.
As for the Horse Creek Hills subdivision, Alsentzer, with Upper Missouri Waterkeeper, said the preliminary plat approval has remained in force while the lawsuit proceeds.
