Case Name: IN THE MATTER OF THE APPLICATION FOR BENEFICIAL WATER USE PERMIT Nos. 66459-76L, Ciotti; 64988-g76L, Starner; and APPLICATION FOR CHANGE OF APPROPRIATION WATER RIGHT No. G15152-S76l, Pope
Court: Montana Supreme Court
Jurisdiction: Montana
Decision Date: 1996-08-22
Citations: 278 Mont. 50
Docket Number: No. 95-080
Parties: IN THE MATTER OF THE APPLICATION FOR BENEFICIAL WATER USE PERMIT Nos. 66459-76L, Ciotti; 64988-g76L, Starner; and APPLICATION FOR CHANGE OF APPROPRIATION WATER RIGHT No. G15152-S76l, Pope.
Judges: JUSTICES HUNT, GRAY and NELSON concur.
Reporter: Montana Reports
Volume: 278
Pages: 50–73

Head Matter:
IN THE MATTER OF THE APPLICATION FOR BENEFICIAL WATER USE PERMIT Nos. 66459-76L, Ciotti; 64988-g76L, Starner; and APPLICATION FOR CHANGE OF APPROPRIATION WATER RIGHT No. G15152-S76l, Pope.
No. 95-080.
Submitted December 14, 1995.
As Amended on Denial of Rehearing September 24, 1996.
Decided August 22, 1996.
53 St.Rep. 777.
278 Mont. 50.
923 P.2d 1073.
For Appellant: Daniel F. Decker (argued), and John B. Carter, Tribal Legal Department, Confederated Salish and Kootenai Tribes, Pablo; James H. Goetz (argued), Goetz, Madden & Dunn, Bozeman.
For Respondent: Hon. Joseph P. Mazurek, Attorney General, Harley R. Harris (argued), Assistant Attorney General, Helena; Tim D. Hall (argued) and Donald D. MacIntyre, Special Assistant Attorneys General, Department of Natural Resources and Conservation, Helena.

Opinion:
JUSTICE TRIEWEILER
delivered the Opinion of the Court.
On April 30,1985, the Confederated Salish and Kootenai Tribes of the Flathead Reservation (Tribes) filed an objection with the Montana Department of Natural Resources and Conservation (DNRC) to an application by Frank Pope, a non-Indian landowner on the reservation, for an authorization to change his point of diversion and place of use of a portion of his on-reservation water right. Between February 10,1987, and September 16,1987, the Tribes filed objections with the DNRC to three applications from non-Indian landowners on the reservation who were seeking permits for new water rights from sources on the reservation. DNRC consolidated the Tribes' objections to all of the water permit applications, and on April 14,1992, issued a final order in which it denied the objections. On January 12, 1995, the District Court affirmed DNRC's final order. The Tribes appeal the District Court's order. We reverse the District Court.
On appeal we address only the issue of whether DNRC has authority to grant new water use permits on the Flathead Indian reservation prior to settlement or adjudication of the Tribes' reserved water rights.
FACTUAL BACKGROUND
On October 5, 1984, Frank Pope, a non-Tribal member who owns land in fee on the Flathead Indian Reservation, filed an application with the Department of Natural Resources and Conservation for a permit to change the point of diversion and place of use of a portion of his existing water right. Between August 19, 1986, and August 4, 1987, three other applicants, all of whom are non-Tribal members who own land in fee on the reservation, filed applications with DNRC to obtain permits for new water rights from sources on the reservation. Following notice of each of these applications, the Confederated Salish and Kootenai Tribes filed objections and requested that the applications be denied in their entirety.
In response to the Tribes' objections, DNRC appointed a hearing examiner and set an initial hearing date for each of the applicant's petitions. Subsequently, the Tribes moved to dismiss one of the cases for lack of jurisdiction and requested that the hearing examiner bifurcate the jurisdictional and substantive issues. The Tribes contended that the merits of the individual applications could not be decided until it was determined whether DNRC has jurisdiction to engage in water rights proceedings on the Flathead Reservation. On November 8, 1989, the hearing examiner granted the Tribes' motion to bifurcate and certified the Tribes' legal objections to DNRC's director pursuant to Rule 36.12.214, ARM.
DNRC director Karen Barclay Fagg consolidated the Tribes' objections to all ofthe applications. On April 30,1990, Fagg issued an order and memorandum in which she concluded that DNRC has jurisdiction to regulate any surplus water on fee land on the reservation even though Tribal reserved water rights have not yet been quantified.
The consolidated cases were subsequently remanded to the hearing examiner who issued individual "Proposals for Decision for each of the Applications." The Tribes filed exceptions to the hearing examiner's proposed decisions based on their contention that DNRC does not have jurisdiction to regulate waters on the reservation. The DNRC director then allowed a consolidated oral argument on September 26, 1991, at which the Tribes were allowed to present exceptions. On April 14, 1992, Fagg issued DNRC's final order which affirmed its previous April 30,1990, order and clarified that it applied to "new permits for surplus, non-reserved water, and to changes [to permits for] surplus, non-reserved water, by non-Indians on fee lands within the exterior boundaries of the Flathead Indian Reservation."
On May 15, 1992, the Tribes simultaneously filed a petition for judicial review in the First Judicial District Court in Lewis and Clark County and a complaint for declaratory and injunctive relief in the United States District Court for the District of Montana. On July 24, 1992, DNRC filed a motion in the First Judicial District Court to affirm its final order regarding jurisdiction.
After considering various motions by the parties, the District Court held that the questions raised in the federal action should be resolved before the state issues, and ordered the state action stayed pending a decision from the federal court. The federal court, however, ordered the federal action stayed until the state issues were resolved and permitted the Tribes to reserve the federal questions pending state court resolution. The federal court expressly held that the Tribes had properly reserved the federal claims for later review.
On January 12, 1995, the District Court, after considering oral arguments from the parties, issued its decision and order affirming DNRC's jurisdiction. The court held that DNRC has jurisdiction pursuant to the Water Use Act to issue new use permits prior to formal adjudication of existing water rights or completion of compact negotiations, that DNRC's jurisdiction to issue such permits is not suspended by § 85-2-217, MCA, and that DNRC is not collaterally estopped by the District Court's prior holding in United States v. Department of Natural Resources and Conservation (1st Jud. Dist. Mont. June 15, 1987), No. 50612.
DISCUSSION
On appeal we address only the issue of whether DNRC has authority to grant new water use permits on the Flathead Indian Reservation prior to settlement or adjudication of the Tribes' water rights. Because this issue is dispositive, we need not address the Tribes' additional contentions that (1) DNRC's jurisdiction to issue water use permits on the reservation is suspended during the pendency of the Tribes' negotiations with the Montana Reserved Water Rights Compact Commission pursuant to § 85-2-217, MCA, and that (2) the DNRC is collaterally estopped by the same District Court's prior decision in United States v. Department of Natural Resources and Conservation (1st Jud. Dist. Mont. June 15, 1987), No. 50612.
This case was bifurcated prior to the DNRC hearing and the only issue decided has been whether DNRC has jurisdiction to engage in water rights proceedings on the Flathead reservation. Because this jurisdictional issue is purely legal, we review the District Court's order to determine whether its interpretation of the law is correct. Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469, 898 P.2d 680, 686.
Title 85, Chapter 2, MCA (Montana Water Use Act) governs the administration, control, and regulation of water rights within the state of Montana. Section 85-2-101, MCA. Among other things, the Act provides for the application and issuance of permits for the appropriation of surface water. The requirements for the issuance of water use permits are specifically set forth in § 85-2-311(1), MCA, which provides that DNRC must issue a permit if an applicant proves by a preponderance of the evidence that all of the following relevant criteria are met:
(a) there are unappropriated waters in the source of supply at the proposed point of diversion;
(b) the water rights of a prior appropriator will not be adversely affected;
(e) the proposed use will not interfere unreasonably with other planned uses or developments for which a permit has been issued or for which water has been reserved .
In this case, the Tribes maintain that given the undisputed fact that they possess senior unquantified reserved water rights, it is impossible for a water permit applicant to prove (1) that there are unappropriated waters in the source of supply pursuant to § 85-2-311(l)(a), MCA; (2) that the Tribes' rights as a prior appropriator will not be adversely affected pursuant to § 85-2-3 ll(l)(b), MCA; and (3) that the applicant's proposed use will not interfere with the Tribes' planned uses for which water has been reserved pursuant to § 85-2-311(l)(e), MCA. The Tribes contend that until their reserved water rights have been quantified by a compact negotiation pursuant to § 85-2-702, MCA, or by a general inter sese water rights adjudication, an applicant cannot meet his burden of proof pursuant to § 85-2-311, MCA, and DNRC will not have jurisdiction to issue new water use permits on the reservation.
The District Court's decision regarding DNRC's jurisdiction to issue water use permits on the reservation pursuant to § 85-2-311(1), MCA, discussed only the applicant's burden to meet the requirements of subsections (a) and (b). Although the Tribes contended that the existing water rights must first be adjudicated and the Tribes' reserved water rights quantified before an applicant could prove that there is unappropriated water available for new use and that the rights of a prior appropriator would not be adversely affected, DNRC maintained, and the District Court agreed that "the applicant need only show that there is water available at the proposed point of diversion, and thus not appropriated, giving the applicant potential, adjudicable water rights to the surplus water."
The District Court's decision rested, in part, on its determination that "appropriated waters" do not include Indian reserved water rights, and therefore, that the Tribes are not "prior appropriators," as contemplated by § 85-2-3 ll(l)(a) and (b). In its decision and order, the court specifically held that:
Section 85-2-102(1), MCA, defines "appropriate" as to "divert, impound, or withdraw (including by stock for stock water) a quantity of water ." Section 85-2-301, MCA, provides that a person may not appropriate water except as provided in chapter 2 of the Water Use Act. Section 85-2-302, MCA, states that "[e]xcept as otherwise provided in (1) through (3) of 85-2-306, a person may not appropriate water . except by applying for and receiving a permit from the department." Section 85-2-311, MCA, sets forth the criteria for issuance of a permit. Subsection (6) provides that any appropriation contrary to the provision of the section is invalid.
Clearly, the language of these sections leads one to conclude that appropriated water is water that has been allocated by the permit process provided in that chapter, and the amount of water used should reflect the amount allocated by permit.
This conclusion addresses the Tribes' contention that an applicant cannot prove the availability of unappropriated water unless the water supply has been quantified. The statutory scheme does not require it.
(Emphasis added.)
This Court has long recognized a distinction between state appropriative water rights and Indian reserved water rights. In State ex rel. Greely v. Confederated Salish and Kootenai Tribes of the Flathead Reservation (1985), 219 Mont. 76, 89-90, 712 P.2d 754, 762, we noted that:
State appropriative water rights and Indian reserved water rights differ in origin and definition. State-created water rights are defined and governed by state law. Indian reserved water rights are created or recognized by federal treaty, federal statutes or executive order and are governed by federal law.
Appropriative rights are based on actual use. Appropriation for beneficial use is governed by state law. Reserved water rights are established by reference to the purposes of the reservation rather than to actual, present use of the water.
(Citations omitted.)
We also distinguished reserved rights on the basis that they need not be diverted from the stream when we observed that:
The right to water reserved to preserve tribal hunting and fishing rights is unusual in that it is non-consumptive. A reserved right for hunting and fishing purposes "consists of the right to prevent other appropriators from depleting the stream waters below a protected level in any area where the non-consumptive right applies" [United States v.] Adair [(9th Cir. 1983)], 723 F.2d [1394,] 1411 [cert, denied, 467 U.S. 1252, 104 U.S. 3536 82 L.Ed.2d 841 (1984)].
The Supreme Court has also held that under the implied-reservation-of-water-rights doctrine, Indians are entitled to sufficient water "to develop, preserve, produce or sustain food and other resources of the reservation, to make it livable." Arizona v. California [(1963)], 373 U.S. [546,] 599-600, [83 S.Ct. 1468, 1497-98, 10 L.Ed.2d 542]. "[I]ndian treaty rights to a natural resource that once was thoroughly and exclusively exploited by the Indians secured so much as, but no more than, is necessary to provide the Indians with a livelihood — that is to say, a moderate living." Washington v. Fishing Vessel Ass'n [(1979)], 443 U.S. [658,] 686, [99 S.Ct. 3055, 3075, 61 L.Ed.2d 823],
The Winters Court held that reserved water on the Fort Belknap Reservation could be beneficially used for "acts of civilization" as well as for agricultural purposes. Winters v. [United States (1908)], 207 U.S. [564,] 576, [28 S.Ct. 207, 211, 52 L.Ed. 340]. It may be that such "acts of civilization" will include consumptive uses for industrial purposes. We have not found decisive federal cases on the extent of Indian water rights for uses classed as "acts of civilization."
It is clear, however, that Indian reserved water rights may include future uses. Arizona v. California, 373 U.S. at 600-01, 83 S.Ct. at 1498; United States v. Ahtanum Irrigation District (9th Cir. 1964), 330 F.2d 897, 914. Most reservations have used only a fraction of their reserved water. National Water Commission, Water Policies for the Future 51-61 (1973). However, reserved rights may reflect future need as well as present use. For example, the "practicallydmgable acreage" standard applies to future irrigation or reservation land, not present irrigation practices and current consumptive uses.
Greely, 219 Mont, at 93-94, 712 P.2d at 764-65.
In addition, the Montana Water Use Act, as amended in 1985, reflects the distinction between federal and Indian reserved water rights and state-created appropriative rights. See, e.g., § 85-2-224, MCA (statement of claim for federal reserved water rights); § 85-2-234(2), MCA (terms of negotiated Indian water rights compact must be included in final decree without alteration); § 85-2-234(3), MCA (final decree must establish existing rights and priorities of Indian tribe possessing water rights arising under federal law); and § 85-2-701 through -705, MCA (establishing reserved water rights compact commission to negotiate with Indian tribes to quantify Indian reserved water rights).
Therefore, an applicant's proof in satisfaction of § 85-2-3 ll(l)(a) and (b), MCA, does not satisfy the requirement of § 85-2-311(l)(e), MCA, that his "proposed use will not interfere unreasonably with other planned uses or developments for which a permit has been issued or for which water has been reserved."
Because of the nature of Indian reserved water rights and because of the fact that the Tribes' rights have not yet been quantified, the Tribes contend that an applicant cannot meet this statutory burden and that DNRC cannot issue a permit consistent with the Montana Water Use Act's statutory scheme.
Although the argument was neither made in the District Court nor in its brief on appeal, DNRC asserted during oral argument, without citation to authority, that § 85-2-311(l)(e), MCA, does not pertain to Indian reserved water rights, but only to those rights reserved by the state or the United States pursuant to § 85-2-316, MCA. However, there is no basis from the plain language of § 85-2-311, MCA, for making that distinction. Furthermore, were we to construe § -311 to exclude Indian reserved rights as opposed to all others, we would be ignoring the admonition in Greely which served as the very premise for our conclusion that the Montana Water Use Act was adequate on its face to adjudicate Indian reserved water rights. There we stated:
We presume that the Water Court will not apply these code sections in an improper manner to the claimants of Indian reserved water rights. Federal Indian law must be applied in these areas as well.
In a similar manner, it may be contended that Section 85-2-316, MCA, which limits the reservation of future uses to certain river basins, sets forth an improper limitation on Indian reserved rights. We also presume that the Water Court will not apply these statutes without regard to controlling federal law on Indian water rights.
We recognize that the Water Use Act of Montana does not explicitly state that the Water Court shall apply federal law in adjudicating Indian reserved rights. However, we conclude that is not fatal to the adequacy of the Act on its face. We hold that state courts are required to follow federal law with regard to those water rights.
Greely, 219 Mont. at 94-95, 712 P.2d at 765-66.
DNRC farther maintains that even if § 85-2-311(l)(e), MCA, does contemplate Indian reserved water rights, an applicant for a water use permit may still, prior to quantification of the Tribes' reserved rights, prove that his proposed use will not interfere with those rights. DNRC contends that, because any new water rights permits it issues are subordinate to the senior rights of the Tribes, the Tribes would not be prejudiced by the issuance of such permits.
It is undisputed that the Confederated Salish and Kootenai Tribes possess reserved water rights. Winters v. United States (1908), 207 U.S. 564, 28 S.Ct. 207, 52 L.Ed 340; Greely, 219 Mont. 76, 712 P.2d 754. The Tribes and the State of Montana are presently involved in formal compact negotiations to quantify the Tribes' reserved rights on the reservation pursuant to § 85-2-701 through -705, MCA. Until the formal negotiations are resolved, however, the extent of the Tribes' reserved water rights remains unknown. Although it is likely that the Tribes' rights are pervasive, reserved water rights are difficult to quantify. See United States v. Alexander (9th Cir. 1942), 131 F.2d 359, 360 (stating that "The [Hellgate] treaty impliedly reserved all waters on the [Flathead] reservation to the Indians"); Greely, 219 Mont. at 92, 712 P.2d at 764 (stating that "Winters [Indian reserved water] rights are difficult to quantify"). It is well-established, however, that Indian reserved rights incorporate both consumptive and non-consumptive uses, both implicit and explicit uses, and both present and future uses for reservation purposes. Greely, 219 Mont. at 93, 94, 98, 712 P.2d at 764, 765, 768. In addition, the Tribes' reserved water rights will presumably include water for agricultural purposes, water for tribal hunting and fishing, and water for "acts of civilization." Greely, 219 Mont. at 92-93, 712 P.2d at 764-65. Water for agricultural purposes includes enough water to "irrigate all the practically irrigable acreage on the reservation." Greely, 219 Mont. at 92,712 P.2d at 764 (quoting Arizona v. California (1963), 373 U.S. 546, 600, 83 S.Ct. 1468, 1498, 10 L.Ed.2d 542). Non-consumptive water use for tribal hunting and fishing rights "consists of the right to prevent other appropriators from depleting the stream waters below a protected level in any area where the non-consumptive right applies." Greely, 219 Mont. at 93, 712 P.2d at 764 (quoting United States v. Adair (9th Cir. 1983), 723 F.2d 1394, 1411). See also Joint Bd. of Control v. United States (9th Cir. 1987), 832 F.2d 1127, 1131-32, cert, denied (1988), 486 U.S. 1007, 108 S.Ct. 1732, 100 L.Ed.2d 196 (stating that the Tribes' aboriginal fishing rights secured by treaty include the right to maintain instream flows and reservoir pools at levels designed to protect tribal fisheries, regardless of the effect on junior claimants to reservation waters). Water for "acts of civilization," includes water to "develop, preserve, produce or sustain food and other resources of the reservation, to make it liveable," and may also include consumptive uses for industrial purposes. Greely, 219 Mont. at 93, 712 P.2d at 764, 765 (quoting Arizona v. California (1963), 373 U.S. 546, 599-600), 83 S.Ct 1468, 1497-98, 10 L.Ed.2d 542).
Although the scope and extent of the Tribes' reserved water rights have not been resolved and are not at issue in this case, the elusive nature of Indian reserved water rights underscores both the difficulty of quantifying those rights and the difficulty a water permit applicant would have proving that his proposed use will not interfere with those rights. Clearly the only way to determine if an applicant's use will unreasonably interfere with the Tribes' reserved water rights is to decide how much water is reserved and how much water is available. The Tribes maintain that such a determination obviously requires quantification of their reserved water rights. DNRC maintains, however, that "the DNRC process rarely requires that the ultimate scope of an existing right be known." According to DNRC, § 85-2-313, MCA, which provides that a permit is provisional and subject to a final determination of existing water rights, is intended to permit the issuance of water use permits prior to the adjudication of existing rights.
Nothing in that section, however, relieves an applicant of his burden to meet the statutory requirements of § 85-2-311, MCA, before DNRC may issue that provisional permit. Instead of resolving doubts in favor of appropriation, the Montana Water Use Act requires an applicant to make explicit statutory showings that there are unappropriated waters in the source of supply, that the water rights of a prior appropriator will not be adversely affected, and that the proposed use will not unreasonably interfere with a planned use for which water has been reserved. Section 85-2-311, MCA. As we stated, the latter requirement is critical to our conclusion in Greely that the Act must be applied consistently with federal Indian law.
A reading of the Water Use Act which did not recognize the clear mandates of § 85-2-311, MCA, would promote the uncontrolled development of a valuable natural resource which, as we recognized in Montana Power Co. v. Carey (1984), 211 Mont. 91, 96, 685 P.2d 336, 339, would "contradict[] the spirit and purpose underlying the Water Use Act."
The Montana Water Use Act, our prior decision in Greely, and the decisions of the federal courts make it clear that an applicant for a permit to use water within the exterior boundaries of the Flathead Reservation must prove that his proposed use does not unreasonably interfere with the Tribes' reserved water rights. We hold that given the nature of Indian reserved water rights such a showing cannot be made until the Tribes' rights are quantified by a compact negotiation pursuant to § 85-2-702, MCA, or by a general inter sese water rights adjudication. Because an applicant's burden of proof pursuant to § 85-2-311(l)(e), MCA, may not be satisfied until the Tribes' reserved water rights are quantified, we further hold that DNRC does not have authority to grant water use permits on the reservation until that quantification is complete.
Accordingly, we reverse the order of the District Court which held that DNRC has jurisdiction pursuant to the Water Use Act to issue new use permits prior to formal adjudication of the Tribes' reserved water rights or completion of compact negotiations.
JUSTICES HUNT, GRAY and NELSON concur.
. The Tribes have challenged DNRC's jurisdiction to issue new water use permits pursuant to § 85-2-311, MCA, and its authority to authorize changes of existing appropriation rights pursuant to § 85-2-402, MCA. Because an applicant's burden of proof is essentially the same under either statute, this Court will focus its discussion on the requirements of § 85-2-311, MCA. Our decision, however, applies equally to both § 85-2-311, MCA, and § 85-2-402, MCA.