On a bitterly cold night in February of 2023, a heated legislative hearing on a water policy proposal ran so late into the evening that dinner appeared before the dozen lawmakers deciding the bill’s fate.
“We’ve been here for a while, so we’re probably going to peel off and everybody’s going to grab a sandwich as we’re listening to testimony,” House Natural Resources Committee Chair Steve Gunderson said. “Keep in mind if you have a lot to say, the person behind you is going to have a lot less to say.”
Lawmakers were hearing public comment on a last-minute bill that sought to expand developers’ access to groundwater — a resource they’ve become increasingly reliant on to build housing in rural and semi-rural areas of Montana, to the chagrin of longtime water users.
Residential developers, real estate representatives and builders testified that revising the statute that exempts some wells from Montana’s water-right permitting process would allow lawmakers, rather than judges, to clarify murky, inconsistently applied guidance.
Changing the law would ease Montana’s housing supply crisis by expanding access to a negligible amount of groundwater, they argued.
But to the slew of agricultural producers and conservationists who lined up to oppose House Bill 642, the measure represented an attempt to appropriate water without giving existing water users legal recourse.
Opponents further argued that by expanding a “giant loophole,” HB 642 would deplete and degrade the water supplies that sustain two of Montana’s leading industries: agriculture and outdoor recreation.
Focused pressure from a variety of groups — including the Montana Department of Natural Resources and Conservation, the state agency charged with appropriating and administering water rights to protect senior water rights holders — convinced committee members to table the proposal a month after its first and only hearing at the Capitol.
That wasn’t the end of the story for the groundwater debate, though.
In the interim leading up to this year’s legislative session, a landmark court case and a prominent working group are shaping the conversation around who gets to use Montana’s groundwater, how much they’re entitled to, and what they must do to gain access to it.
While some say a collaboratively developed exempt well proposal that’s entered the legislative arena this year is a much-needed fix for a famously thorny issue, others describe the proposition as a “raw deal” for senior water rights holders and others reliant on an abundant supply of clean, cold water.
The Influence of Horse Creek Hills and a Stakeholder Group
Although also used for stock water, firefighting and industrial applications, exempt wells are most commonly used for residential development.
Thousands of subdivisions in some of Montana’s fastest-growing valleys may have never been built without access to exempt wells, which have become the water supply of choice for many developers, the Montana Free Press reports.
Between September 2014 and October 2022, the state reviewed 4,690 subdivision applications incorporating exempt wells and just 205 projects that followed the more expensive, time-consuming and uncertain permitting process that’s designed to protect existing water users, according to the DNRC.
One such project was on track to incorporate four exempt wells into a 42-unit subdivision using the kind of “phased” development approach that existing water users have become increasingly wary of. The Horse Creek Hills development was forwarded by 71 Ranch, a sprawling Martinsdale-based business owned by Errol Galt, whose family has been likened to the Duttons in the “Yellowstone” TV series, given the sweep of their landholdings and the strength of their political ties.
Despite encountering significant opposition at county commission meetings, the project was set to clear its final round of regulatory approvals when it hit a speed bump. In 2022, environmental nonprofit Upper Missouri Waterkeeper and a handful of neighboring landowners filed a lawsuit challenging the project and its four preliminarily approved exempt wells, arguing that the state and county were effectively ignoring a more than 50-year-old piece of Montana water law designed to protect senior water rights holders.
Last February, district court Judge Michael McMahon sided with the plaintiffs in an 85-page orderthat scolded DNRC for “tortuously misreading its own rules and ignoring Supreme Court precedent” on the cumulative impacts of exempt wells, especially near Canyon Ferry, a trout-laden reservoir already grappling with the kind of water supply and water quality issues that are exacerbated by wells and the septic systems that often accompany them.
McMahon revoked the Horse Creek Hills subdivision application, chastised DNRC for “the (ongoing) appropriations of millions if not billions of water [that] should have been left in aquifers for the benefit of senior water rights holders,” and directed the department to revise its guidance to comply with the Montana Water Use Act of 1973.
While McMahon was considering the Horse Creek Hills matter, debate continued in another prominent venue: the Comprehensive Water Review Stakeholder Working Group DNRC convened to tackle some of the touchier and more complicated issues in the water arena.
Over the past year and a half, the group has developed policy proposals addressing the future of the Montana Water Court, the DNRC’s role in subdivision reviews, and the process for changing where and how a water right is used.
In total, the group has produced five legislative proposals that aim to untangle some of the knots associated with administering decades-old water law in the face of shifting supply and demand dynamics.
A Broadwater County judge ruled in favor of a small coalition of landowners and water rights holders who challenged a subdivision proposed for an area already grappling with water supply and quality issues.
The future of exempt wells is the slipperiest of those issues — and one of the most technical, given conflicting interpretations about the limits of the exemption.
The size of the appropriation has fluctuated in response to court rulings and shifting DNRC guidance on “combined appropriation,” but exempt wells are generally understood to provide for 10 acre-feet of water, which is enough to meet the domestic needs of 35 families or water four acres of lawn and garden.
Many of the working group members have been active on water issues for years, so the broad outlines of the debate, which fall along the fault lines demonstrated in the HB 642 hearing from 2023, are familiar.
To secure access to a critical — but limited — resource, agricultural producers and developers are known to quibble about the cumulative impacts of one another’s use.
While DNRC has produced graphics clearly establishing irrigation as the No. 1 use of water in Montana, its estimates surrounding the amount of water that is being pumped out of exempt wells are rough due to an absence of comprehensive monitoring data.
Nicole Rolf with the Montana Farm Bureau Federation, one of the few working group members who voted against advancing the exempt well bill the group developed, said she still hasn’t seen any research indicating that federation members won’t be harmed by an expansion of exempt wells.
“Based on the lack of knowledge, we want to err on the side of caution, protect the resource, and protect the water users that already have water rights,” Rolf told MTFP.
In his ruling, McMahon alluded to the uncertainty surrounding the total volume of water that’s been appropriated using exempt wells. McMahon used DNRC data and projections from 2016 to estimate that existing users of exempt wells are entitled to appropriate between 417 and 622 billion gallons of groundwater per year.
The trendlines are increasing, he added, writing that “while each exempt well might appropriate ‘only a de minimis’ quantity of water, they are starting to add up.”
Montana League of Cities and Towns Executive Director Kelly Lynch recently told MTFP that her organization, which includes some municipalities with water rights that predate Montana statehood, has concluded that there two options to rein in the DNRC’s permissive approach toward exempt wells: challenge the constitutionality of the exempt well statute in court, or come to the table to hash out a workable legislative compromise that comports with McMahon’s ruling and a 2016 Montana Supreme Court decision siding with environmental nonprofit Clark Fork Coalition.
“After the Clark Fork Coalition case, there has been, in every session, a knock-down, drag-out fight over how to fix it. Everyone’s just sick of it,” Lynch said of the working group’s commitment to addressing the issue.
'Shared Sacrifice'
Dozens of meetings and hundreds of hours later, Lynch and her colleagues on the working group have developed a proposal that attempts to clarify how and where exempt wells can be used for residential subdivisions.
While she and several of the working group members MTFP interviewed described it as a “shared sacrifice” compromise, it wasn’t unanimously approved by the working group, a dynamic reflected in the proposal’s mixed reception in agricultural and conservation circles.
The proposal DNRC came up with based on the recommendations of the work group has three major components:
- It makes exempt wells off-limits for future residential development in the Gallatin, Bitterroot, Helena and Missoula valleys. These “red areas” were established using criteria based on the number of exempt wells, the legal availability of water — or the amount that’s been appropriated in that area already — and declining groundwater trends.
- It establishes a process for concerned parties to petition DNRC to close other aquifers based on water availability or water quality concerns, and designates two areas where monitoring and reporting would be required for future exempt wells. (The working group considered moving these two “yellow areas” to full-blown closures, but ultimately decided that the Billings Terrace Aquifer and the Flathead Valley Aquifer don’t presently meet legal availability thresholds.)
- In all other parts of the state, it sets parameters for using exempt wells for subdivisions (except the controlled groundwater closures that already exist in statute). In these “green areas,” which include the vast majority of the state, there is a formula for the allocation based on the number of lots and the size of the parcel being subdivided.
The maximum amount of water that would be allocated to an eligible subdivision in the green area is 24 acre-feet, which could provide for the household needs of about 85 families or irrigate 10 acres of lawn or garden. Subdivisions of more than 24 lots would be barred from using exempt wells. - It specifies that most uses of exempt wells outside the subdivision process would adhere to the status quo. Wells for stock water tanks and individual family transfers for properties larger than 140 acres, for example, would be administered in much the same way they are today.
Lynch, like other working group members MTFP interviewed, acknowledged that the group’s proposal is not perfect and won’t be embraced by all water users. Still, she described it as a “baby step” toward administering groundwater in a “better, more science-based way.” Adopting it will alleviate some of the water supply and nutrient contamination issues that have plagued some of the state’s most iconic waterways, she argued.
“We’ve got massive areas where developers will no longer get any access to the exempt well,” Lynch said. “These are areas where we have had severe problems with dense development that is taking water that doesn’t belong to them, for free, without going through a process — no notice to senior water rights holders — and contributing massive amounts of nutrients into the system and into the surface water.”
Clayton Elliott, a working group member who serves as Trout Unlimited’s conservation and governmental affairs director, described the proposal as a “tenuous compromise.”
“There are pieces that give me concern, [particularly] in the green areas. That being said, I know that my friends in the development community are not very pleased about the red areas,” he said. “It’s not what any one of us would have walked in here wanting, but it’s what we can all live with.”
With little in the way of discussion, the House Natural Resources Committee amended and then tabled HB 642. As originally proposed, HB 642 would have granted some existing well owners access to additional groundwater and expanded the permitting loophole to allow larger subdivisions additional groundwater without going through a permitting process.
Mark Taylor, who lobbies on behalf of 24 statewide and national organizations, including Big Sky-area developer Lone Mountain Land Co. and the Hospitality and Development Association of Montana, told MTFP that there is a chain of considerations at play in this debate: Montana needs to dramatically increase its housing stock to meet demand, public water systems can’t practicably reach all new housing developments, and the DNRC’s standard water rights approval process is an “imperfect” permitting vehicle.
“The unique thing about this effort is this attempt to solve the exempt well conversation at an aquifer level, recognizing the importance of preserving the interest of senior water rights holders and balancing it with emerging water users needs, especially where there isn’t reasonable access to public water and sewer,” Taylor said.
But to other stakeholders in the water debate, the proposal is not balanced. Fresh off a victory in the Horse Creek Hills lawsuit, Guy Alsentzer with Upper Missouri Waterkeeper described the working group’s proposal as “a special handout” for developers that’s a “raw deal” for private property rights, the environment and the state’s outdoor heritage.
Alsentzer argued that the proposal doesn’t comport with McMahon’s ruling dictating that subdivisions are entitled to a single 10 acre-feet allocation. Asked to respond to this understanding of the allocation, DNRC Water Resources Division Chief Anna Pakenham Stevenson said some applications the department evaluates are eligible for multiple exceptions depending on specific considerations such as ownership and use changes.
Alsentzer also criticized the geographic scope of the aquifer closures, arguing that a more holistic approach would have encompassed entire basins. (The group contemplated sub-basin closures, as well as a more limited “stream depletion zone” framework, but settled instead upon using alluvial aquifer boundaries.)
“We’re a state that follows the prior appropriations doctrine,” Alsentzer continued. “If there’s going to be any integrity left in that law, we shouldn’t be expanding the use of exempt wells and creating exceptions to the rule that swallow common sense.”
Hertha Lund, a self-described rancher’s wife and water law attorney, echoed some of Alsentzer’s concerns. She worries that water users will only truly appreciate the cumulative impact of exempt well withdrawals when wells and streams start drying up, or cracks start forming in the earth due to the number of new straws being inserted into the aquifer.
“We have to be careful that water doesn’t run toward money and away from the system,” Lund said, referencing the prior appropriation doctrine that prioritizes senior water rights holders over those with newer appropriations. “What if we’re wrong, and we dewater our groundwater, just like they’ve done in California and Idaho? That’s a problem.”
Exempt wells are the source of one of the biggest water fights before state lawmakers, who are making a concerted effort to increase housing supply in one of the nation’s fastest-growing states without instigating a knock-down, drag-out fight with agricultural producers.
Having spent decades in the legislative arena — this is her 10th session working the halls of the Montana Capitol to shape policy — Lynch, with the Montana League of Cities and Towns, is no stranger to stubborn issues that resist statutory fixes. Lynch has seen other working groups crash and burn, including a failed attempt to adopt new water quality rules to comply with a 2021 bill that sought to loosen nutrient pollution standards.
In mid-January, Lynch told MTPF that she “absolutely” feels the exempt well proposal has a shot at passing. A beat later, she paused to qualify her statement.
“You never know in a legislative session. We’ve got big things coming up: property tax stuff, Medicaid, the judicial stuff,” she said. “Who knows what gets tied to what? I hope that people see this as something that really needs to be fixed.”
As of Jan. 29, a bill drafted by the Legislative Services Division, which produces the version of the bill that lawmakers will debate, was not yet available. Republican Sen. Wylie Galt, son of Horse Creek Hills developer Errol Galt, is widely expected to sponsor the bill.
