Eldorado Co-Op Canal Co. v. Lower T

October 7 2014
DA 13-0709
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 272
ELDORADO CO-OP CANAL CO.,
Claimant and Appellee,
LOWER TETON JOINT OBJECTORS,
Objectors and Appellants,
NOIA: TETON COOP RESERVOIR CO.,
FARMERS COOPERATIVE CANAL CO.,
Objector, Appellee and Cross-Appellant,
and
PATRICK SAYLOR,
Intervenor and Cross Appellant.
APPEAL FROM: Montana Water Court, Cause No. 41O-129A
Honorable Russ McElyea, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Stephen R. Brown, Garlington, Lohn & Robinson, PLLP,
Missoula, Montana
For Appellee Eldorado Coop Canal Company:
John E. Bloomquist, Bloomquist Law Firm, PC, Helena, Montana
For Farmers Coop Canal Company and Patrick Saylor:
Michael J. L. Cusick, Abigail R. Brown, Moore, O’Connell
& Refling, P.C, Bozeman, Montana
For Amicus:
Peter G. Scott, Gough, Shanahan, Johnson & Waterman, PLLP,
Bozeman, Montana
Submitted on Briefs: July 30, 2014
Decided: October 7, 2014
Filed:
Clerk
2
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 Monte Giese, Steven Kelly and William Reichelt, often referred to as the Lower
Teton Joint Objectors, and Patrick Saylor, intervenor, all appeal from the Water Court’s
“Order Amending Master’s Report and Adopting as Amended,” in Water Court Case
41O-129.
¶2 We restate the Issues as follows:
¶3 Issue One: Did the Water Court err in amending the Water Master’s Report
finding that Saylor was a party to an historical water exchange or substitution plan under
which he provided the source of carriage water used to deliver water to Choteau Cattle
Company through the Bateman Ditch?
¶4 Issue Two: Did the Water Court err by including Choteau Cattle on the tabulation
of water rights authorized to divert water from the Teton River into the Bateman Ditch
under a water rights exchange or substitution plan not claimed by any person?
¶5 Issue on Cross-Appeal: Whether water rights in addition to Choteau Cattle can be
diverted down the Bateman Ditch.
¶6 We affirm in part and reverse in part.
BACKGROUND
¶7 Monte Giese, Steven Kelly and William Reichelt are water users who hold
appropriation rights from the lower Teton River in Chouteau County, Montana. In 2011
they commenced an action in the Montana Ninth Judicial District Court against the Water
Commissioners appointed by the District Court to administer certain water rights diverted
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from the Teton River pursuant to the 1908 water rights decree in Perry v. Beattie, Cause
371, Ninth Judicial District Court. The water rights claimed by Giese, Kelly and Reichelt
were not included in the Perry decree, which involved only rights diverted upstream near
Choteau, Montana. Giese, Kelly and Reichelt claimed that the Water Commissioners’
practice of diverting water out of the natural channel of the Teton River and into the
Bateman Ditch harmed their appropriation rights by depriving the Teton River aquifer of
recharge water. They ultimately sought relief under § 85-2-406(2)(b), MCA, which
allows a district court to certify a dispute to the Chief Water Judge (the Water Court) for
a determination of rights when the dispute involves water rights not all of which have
been conclusively determined in prior court decrees.
¶8 The District Court dismissed the petition and Giese, Kelly and Reichelt appealed.
This Court reversed and remanded to the District Court with instructions to certify all
appropriate issues to the Chief Water Judge as provided in § 85-2-406(2)(b), MCA.
Giese v. Blixrud, 2012 MT 170, 365 Mont. 548, 285 P.3d 458. In December 2012 the
District Court issued a certification notice requesting that the Water Court “make a
determination of all existing rights to divert water to the ditch commonly known as the
Bateman Ditch.”
¶9 The Water Court, with the agreement of the parties, determined to resolve the
certified issues in the context of Water Court Case 41O-129, which involved certain
Teton River water right claims by the Eldorado Coop Canal Company, along with the
objections to those claims. The parties to Case 41O-129 had conducted an evidentiary
hearing in June 2012 just prior to this Court’s decision in Giese. The parties agreed that
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the record of that hearing could serve as the evidentiary basis for resolving the certified
question from the District Court involving the Bateman Ditch, while reserving resolution
of any other issues relating to the Eldorado claims.
¶10 In February 2013 the Water Master issued the “Master’s Report Regarding the
Bateman Ditch Case 41O-129,” including findings of fact and conclusions of law
regarding use of the Bateman Ditch. Parties filed objections to the Master’s Report, and
in June 2013 the Water Judge issued the “Order Amending Master’s Report and
Adopting as Amended.” In summary, the Water Court found that two of the Water
Master’s findings of fact were not supported by substantial evidence in the record and
should be modified. The Water Court also found that Saylor had a protectable right to
divert Teton River water through the Bateman Ditch to the downstream diversion point of
the Choteau Cattle Company as a water conservation measure, while exercising his own
appropriation rights from the Teton. Both Saylor and the Lower Teton Joint Objectors1
appeal.
¶11 The Teton River rises in the Rocky Mountain Front in west central Montana and
flows eastward for almost two hundred miles before joining the Marias River and soon
thereafter the Missouri River. Giese, Kelly and Reichelt use water from the lower or
downstream portion of the Teton near Fort Benton, Montana. They claim generally that
they are damaged by diversion of water into the Bateman Ditch on the upstream portion
1
The “Lower Teton Joint Objectors” is not an actual organization, but only a reference to Giese,
Kelly and Reichelt, who have water rights on the Lower Teton and who object to some
diversions through the Bateman Ditch.
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of the Teton near Choteau, Montana, and that their “calls” on upstream appropriators to
release water for their downstream use have been ignored.
¶12 The dispute arises at least in part from the 1908 decree in Perry.2 That case
determined the priority date and flow rate of about 40 water right claims in the upper
Teton River west of Choteau and far upstream from Giese, Kelly and Reichelt. The
District Court appointed Water Commissioners to administer the water rights decreed in
Perry, as provided in § 85-5-101, MCA. The majority of water users on the Teton (and
their successors in interest, including downstream users Giese, Kelly and Reichelt) were
not parties to the Perry case. Giese, Kelly and Reichelt claim water rights from the Teton
with priority dates that are senior to or contemporary with the upstream rights decreed in
Perry. Water right claimants on the Teton are participating in the Water Court’s on-
going adjudication of water rights under Title 85, chapter 2 of the Montana Code. The
Water Court issued its Temporary Preliminary Decree of water rights from the Teton in
December 2005 but has not issued a final decree.
¶13 About 1950 (the exact date has not been established), the Water Commissioner
appointed by the District Court to administer the Perry decree began from time to time
diverting most or all of the flow of the Teton River out of its natural channel and into the
Bateman Ditch. That ditch runs roughly parallel to the natural channel of the Teton River
and bypasses a stretch of the river channel several miles long that is sometimes referred
to as the Springhill Reach. The Reach is an area of natural gravel riverbed west of
Choteau, and a significant amount of the water flowing through it will seep into the
2
Teton County is now part of the Ninth Judicial District.
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ground. The Bateman Ditch diversion eliminates the seepage of water in the Reach and
the water can be used from the ditch or returned to the natural channel. This diversion
practice was not established pursuant to any written agreement among appropriators or
any express order of the District Court.
¶14 Intervenor Saylor has Perry decree rights to use up to 1500 miner’s inches3 of
water from the Teton River. Saylor uses the Bateman Ditch as the point of diversion for
his decreed rights, and the Ditch crosses his land. Eldorado diverts water from the Teton
River above the Bateman Ditch pursuant to its Perry decree rights. Eldorado distributes
water through canals to its members.
¶15 The right to 300 miner’s inches of water from the Teton now held by the Choteau
Cattle Company is the most senior right in the Perry decree, with a priority date in 1876.
Choteau Cattle’s point of diversion is the Burd Ditch, the headgate for which is located
just downstream from both the Springhill Reach and the point where water diverted into
the Bateman Ditch re-enters the Teton River channel. While Choteau Cattle can often
divert its water right out of the natural flow of the Teton River via the Burd Ditch, that is
not possible during times of low flow because the water seeps into the ground in the
Springhill Reach. While Choteau Cattle’s Perry right is for 300 miner’s inches of water,
a significant multiple of that amount has to flow through the Reach for Choteau Cattle to
be able to divert its right from the natural river flow.
3
A miner’s inch is a method of measuring the flow of water, and 100 inches is equivalent to 2.5
cubic feet of water per second. Section 85-2-103, MCA.
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¶16 Diversion of water through the Bateman ditch and returning it to the natural
channel just above the Burd Ditch is a way in which Choteau Cattle has exercised its
water right. The proponents of diverting Choteau Cattle’s right through the Bateman
Ditch are holders of junior Perry decree rights. When Choteau Cattle’s water is delivered
through the Bateman ditch, the effect is to leave water in the natural channel above the
Springhill Reach that can be used by Perry right holders junior to Choteau Cattle. If the
Bateman Ditch were not used to deliver water to Choteau Cattle during times of low
flow, upstream junior right holders (including Saylor and Eldorado) would have to forego
or greatly curtail their water use.
¶17 There are no apparent records of how often the Bateman Ditch diversion is used
each irrigation season to deliver water to Choteau Cattle. The diversion is not required in
times of higher water flows in the Teton River, and the frequency of its use has been
described as occasional or sporadic.
¶18 Earlier in the water rights adjudication process both Eldorado and Choteau Cattle
claimed the Bateman Ditch as a point of diversion of their water rights from the Teton
River. Both of those entities for their own reasons have now specifically disclaimed the
Bateman Ditch as a point of diversion. Choteau Cattle disclaimed the Bateman Ditch as a
point of diversion for its decreed right out of a concern that it would have less water
available at its headgate at the Burd Ditch because of ditch losses in the Bateman Ditch.
Saylor is now the only claimant in this matter who specifically designates the Bateman
Ditch as its point of diversion from the Teton River.
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¶19 Giese, Kelly and Reichelt challenge the Water Commissioner’s practice of
diverting the flow of the Teton River into the Bateman Ditch to avoid the Springhill
Reach. They contend that their water rights are senior to the rights of many upstream
Perry decree rights and that their rights predate the Water Commissioners’ diversion of
the Teton through the Bateman Ditch. They contend that since the Bateman Ditch was
not used to divert the entire river at the time of the Perry decree, the Water
Commissioner lacked the authority to make the decision to do so. They contend that they
are entitled to have the river flow in the natural channel in the condition it was in at the
time their appropriations were perfected and that the natural channel flow cannot be
altered if it adversely affects their rights. They contend that allowing the natural water
seepage through the Springhill Reach is a key element in the hydrology of the Teton
River; that it is essential to stable groundwater and springs; and that it is essential to their
access to the Teton River water and to the exercise of their water rights.
¶20 Giese, Kelly and Reichelt acknowledge that it is proper to divert Teton River
water into the Bateman Ditch as needed to fulfill the Saylor right. But they contend that
diversion of any water in addition to that needed for the Saylor right is not a beneficial
use of water and is unlawful.
STANDARD OF REVIEW
¶21 This Court recently set out the standards of review in an appeal from the Water
Court’s review of a Water Master’s report. Heavirland v. State, 2013 MT 313, ¶¶ 13-16,
372 Mont. 300, 311 P.3d 813; Skelton Ranch, Inc. v. Pondera County Canal & Reservoir
Co, 2014 MT 167, ¶¶ 25-27, 375 Mont. 327, 328 P.3d 644. In summary, the Water Court
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reviews the Water Master’s findings of fact to determine whether they are clearly
erroneous. The Water Court reviews the Water Master’s conclusions of law to determine
whether they are correct.
¶22 This Court reviews a Water Court decision under the same standards applied to
District Court decisions. The Water Court’s review of the Water Master’s report is
reviewed de novo as an issue of law, to determine whether its application of the standards
of review is correct. Skelton Ranch, ¶ 26.
DISCUSSION
¶23 Issue One: Did the Water Court err in amending the Water Master’s Report
finding that Saylor was a party to an historical water exchange or substitution
plan under which he provided the source of carriage water used to deliver water
to Choteau Cattle Company through the Bateman Ditch?
¶24 Both the Water Master and the Water Court determined that the practice of
diverting the Teton River flow into Bateman Ditch in times of low water flow to deliver
water to Choteau Cattle was a historic water conservation measure that should be
recognized and allowed. The Water Master determined that the Bateman Ditch diversion
was a practice or tool that the District Court and its Water Commissioners could use to
manage the water rights on the Teton River. The Water Master concluded that the
practice conserved water in the sense of making it available to junior right holders
upstream from the Bateman Ditch who would otherwise have to allow water to flow
down the River to get to the Choteau Cattle point of diversion at the Burd Ditch. The
Water Court concluded that the Bateman Ditch diversion was more than just a water
management tool but was a recognizable and protectable right held by Saylor.
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¶25 The parties disagree about how to classify the Bateman Ditch diversion under
Montana law. While water exchanges are recognized by statute, §§ 85-2-411 and -413,
MCA, the Lower Users say that it was error for the Water Court to characterize the
Bateman Ditch practice as an exchange agreement because there is no secondary source
of water being introduced into the Teton River. The Water Master referred to the
Bateman Ditch diversion as a “conservation measure” or water-saving measure in the
sense that its effect is to make water available to upstream junior appropriators that might
otherwise have to be allowed to pass down the channel to Choteau Cattle.
¶26 Both Saylor and Eldorado argue that the historical practice of using the Bateman
Ditch to deliver water to Choteau Cattle should be recognized and confirmed. The Lower
Users counter that the Water Court created a right not recognized in water law by
establishing Saylor’s ownership of the diversion practice. The Lower Users argue that
because both Choteau Cattle and Eldorado abandoned the Bateman Ditch as a point of
diversion, there is no longer any basis for recognizing a right to divert water through the
Ditch to deliver water to Choteau Cattle. They note that Saylor alone now claims the
right to divert water through the Bateman Ditch and Saylor’s claim is limited to diverting
his rights decreed in the Perry case. The Lower Users claim that using the Bateman
Ditch diversion to deliver water to Choteau Cattle lacks any basis in law and should not
be mentioned in any decree.
¶27 It is clear that Saylor has agreed with and supported diversion of water down the
Bateman Ditch during times of low flow in order to deliver water to Choteau Cattle. The
Bateman Ditch crosses his property and he uses it to exercise his water rights from the
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Teton River. In addition, like other upstream users with rights junior to Choteau Cattle,
he has gotten benefit of water availability that he would not otherwise enjoy.
¶28 The Water Master concluded that while there is evidence of 60 or more years use
of the Bateman Ditch to deliver water to Choteau Cattle, the future use of the practice
depends not upon its historical use but upon the authority of the District Court to
administer water decrees for the benefit of all users. The Water Master determined that
the “nature and extent of that authority is a question for the District Court” and that the
District Court can decide whether it has authority to use the practice and if it is
appropriate to use it “given the factual situation presented at that time.” The Water
Master correctly concluded that the district courts retain the authority to supervise the
distribution of water among all appropriators. Sections 85-2-406(1) and 85-5-101,
MCA. That includes enforcement of Temporary Preliminary and Preliminary Decrees of
the Water Court. Section 85-5-101(1), MCA.
¶29 The Water Court, in its review of the Water Master’s report, determined that use
of a diversion ditch to avoid a “losing reach of a natural stream” can “rise to the level of a
protectable interest.” The Water Court determined that the use of the Bateman Ditch to
deliver water to Choteau Cattle is similar to substituting a water source, using storage
water, or changing the method of water delivery. The Water Court noted that Montana
recognizes “exchange agreements” under which water stored in a reservoir can be
discharged into a stream so that the water may be diverted from that stream by a water
user who does not otherwise have rights in that stream. Section 85-2-413, MCA. See
also § 85-2-411, MCA, allowing water to be turned into a natural stream channel and
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diverted downstream. The Water Court concluded that “[r]ecognition of exchange plans,
conservation measures and other innovations to maximize beneficial use of a limited
resource is consistent with Montana’s stated policy regarding water use,” citing
§§ 85-2-101(3) and 85-1-101(1), MCA.
¶30 The Water Court further determined that the Lower Teton Users’ objections to the
Bateman Ditch diversion based upon their claim that it harms their rights should not
preclude recognition of the Bateman Ditch diversion. Those users can still go to court
and seek relief if they can prove harm. See e.g. Bostwick v. DNRC, 2013 MT 48, ¶ 30,
369 Mont. 150, 296 P.3d 1154. The Water Court concluded that even though use of the
Bateman Ditch to deliver water to Choteau Cattle is no longer part of any claim in the
water adjudication process, that fact should not preclude recognition of the practice
because water law recognizes “historic patterns of water usage.” And the Water Court
concluded that while the Bateman Ditch diversion is not an exchange plan, “it is typical
of historic arrangements made throughout Montana and elsewhere in the western states to
obtain maximum benefit from a limited resource. Such arrangements deserve recognition
because they are consistent with Montana’s state goal of conserving water resources.”
¶31 We agree with the analysis of the Bateman Ditch diversion to deliver water to
Choteau Cattle by the Water Master and the Water Court up to this point. However, the
Water Court took the further step of apparently establishing the Bateman Ditch diversion
as a right belonging to Saylor, stating: “Accordingly, this Court recognizes Patrick
Saylor’s right to use the Bateman Ditch in lieu of the natural channel of the Teton River
to deliver water to CCC’s head gate at the Burd Ditch.”
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¶32 By concluding that the Bateman Ditch diversion to supply water to Choteau Cattle
is a private right held by Saylor, the Water Court reached a conclusion that is contrary to
the statutory roles of the district courts and the water commissioners in administering and
overseeing water rights. Section 85-5-101. MCA. Whereas the Water Court invested
“Saylor with the option of delivering [the Choteau Cattle] claim . . . through the Bateman
ditch, [but] he is not obliged to do so,” that power rests in the District Court and its
appointed Water Commissioner. It is not Saylor’s right or duty to administer the water
rights of others any more than it is the right or duty of Eldorado or any other upstream
junior right holder.4 That is a management tool available to the District Court and its
Water Commissioner, as it has been for many decades on the Teton River.
¶33 We therefore remand to the Water Court to modify the decision to the extent that
the District Court’s Water Commissioner, under the supervision of the District Court,
may determine whether and when to use the Bateman Ditch to deliver water to Choteau
Cattle. If Giese, Kelly and Reichelt or any other downstream user claim adverse effects,
they can seek relief in the District Court.
¶34 Issue Two: Did the Water Court err by including Choteau Cattle on the tabulation
of water rights authorized to divert water from the Teton River into the Bateman
Ditch under a water rights exchange or substitution plan not claimed by any
person?
¶35 The Water Court’s Order Amending Master’s Report included a listing of water
rights that “may be diverted into the Bateman Ditch.” That list included the three Saylor
rights totaling 1500 miner’s inches or 37.5 cubic feet per second, as well as the Choteau
4
The Bateman Ditch crosses Saylor’s land, and the Water Master found that Saylor is the
“acknowledged owner” of the Ditch.
14
Cattle right to 300 miner’s inches or 7.5 c.f.s., as decreed in the Perry case. The order
contains this list because the District Court’s certification to the Water Court requested a
“tabulation or list of the existing rights to use this [Bateman] ditch and their relative
priorities.” Therefore, it was entirely proper and responsive to the District Court’s
certification for the Water Court to provide a listing of water rights that can be diverted
through the Bateman Ditch.
¶36 The Lower Users argue that it was improper to list Choteau Cattle’s right because
Choteau Cattle had specifically removed the Bateman Ditch as a point of diversion for its
right, and the Water Court had accepted that removal. In addition, they argue that neither
Saylor nor any other party claimed the right in the water adjudication process to use the
Bateman Ditch to supply Choteau Cattle’s right. But, since use of the Bateman Ditch to
deliver water to Choteau Cattle is a management tool and not a right personal to Saylor, it
does not matter whether he claimed the right to do so in the water right adjudication
process. We conclude that the Water Court acted properly in listing the water rights that
can be diverted through the Bateman Ditch.
¶37 Issue on Cross-Appeal: Whether water rights in addition to Choteau Cattle can
be diverted down the Bateman Ditch.
¶38 This involves two other water right claims, and Saylor asserts that they should also
be listed in the tabulation of rights that can be diverted through the Bateman Ditch. The
Water Court declined to list these rights after finding that they had only rarely been
diverted down the Bateman Ditch. In addition, the owners of those rights are not
15
involved in this appeal. We agree with the Water Court’s conclusions and decline to
consider this issue further.
¶39 The decision of the Water Court is affirmed in part, reversed in part and remanded
to the Water Court for further proceedings.
/S/ MIKE McGRATH
We Concur:
/S/ PATRICIA COTTER
/S/ MICHAEL E WHEAT
/S/ BETH BAKER
/S/ JIM RICE
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