Montana law allows landowners to drill a well withdrawing 35 gallons per minute up to 10 acre-feet per year without a permit. However, a combined appropriation by two or more wells that exceeds 10 AF does require a permit.
In 1987, the Montana Department of Natural Resources and Conservation enacted a rule providing that an appropriation of water from the same source aquifer by means of two or more wells requires a permit if its purpose could have been accomplished by a single appropriation.
The 1987 rule proved to be difficult to administer. A Notice of Completion of Groundwater Development is filed and processed by a technician, but it is not reviewed by water rights specialists or hydrologists. That meant that combined appropriations could escape regulation, so in 1993, the DNRC amended the rule to say that only wells that were physically connected into the same system constituted a combined appropriation requiring a permit.
The 1993 rule permitted developers to build large subdivisions using a separate exempt well drilled by individual homeowners as the water supply. A 100-lot subdivision with individual wells could withdraw up to 1,000 AF of ground water without any review of the adverse effect to senior water rights. Senior water right holders and water conservation groups became concerned about the effect of these withdrawals on their water rights, and they sued the DNRC to overturn the exempt well rule in 2009 and prevailed in 2014 when the District Court reinstated the 1987 rule. During the five years of litigation, the stakeholders tried to find a compromise to allow developers to build subdivisions with exempt wells, but were unable to reach agreement.
The DNRC estimates that a household of three with a quarter-acre of lawn will divert .69 AF per year. Under the current 10 AF rule, a developer can only create 14 quarter-acre lots in an entire project with a single exempt well. You may wonder, why don’t developers just drill a single well and file a permit application like everyone else who wants more than 10 AF of water? Even if the permit process costs $80,000, that only raises the price of each lot in the 100-lot subdivision by $800, substantially less than the homeowner spends for an individual well. Therefore, the requirement to drill the well and obtain the beneficial water use permit is not a deal-breaker.
However, providing water to a subdivision from a single well requires pipes and service connections which will subject the developer to regulation as a public water supply by the Montana Department of Environmental Quality and require a second well to serve as backup in case the original well fails. The investment of time and money for the added permits and infrastructure could make a lot prohibitively expensive for the average home buyer and stifle subdivision growth.
I propose a compromise where the developer applies for a beneficial use permit for water for one household per lot, but the permit allows the water right to be diverted from a well on each lot. Although the number and general location of the wells, i.e. points of diversion, would be requested in the permit application, the precise location of the point of diversion would not be set until the notice of completion is filed. The DNRC could require annual reports of completion progress.
My proposal allows for each subdivision to appropriate and use water based on local conditions rather than the state-wide solutions proposed in the 2015 Legislature. The developer determines the desired number and size of the lots and drills an adequate number of “exempt” wells to be used for testing and monitoring. The requested volume and flow rate would be based on the standards already in use, i.e. .69 AF diverted volume per household. The developer can determine the size and number of lots or limit lawn size by covenant if desired. Once the size of the water right is established and the monitoring wells are completed, the developer proceeds through the permit process. In order to obtain a permit, the applicant would have to prove that granting the permit would not cause adverse effect. The DNRC could require a mitigation plan to offset depletions. Senior water right holders could object to the permit and participate in setting conditions to protect their water rights. If the permit application is granted, the applicant would be required to report annually on the number and location of the individual wells as they are completed.
The advantage to developers is that they would be able to design a subdivision without the restrictions imposed by the 10 AF limit. Under the current rule, a developer can only create 14 quarter-acre lots in an entire project with a single exempt well. Because the developer would be required to apply for a permit, stream flows and senior water users would be protected from adverse effect. Future homebuyers could still find an affordable lot to build a new home. After five years of wrangling and several failed attempts to change the law, maybe it’s time to think about a different approach.
Nancy Zalutsky is a Research Analyst at Ponderosa Advisors LLC, a boutique advisory firm leveraging state-of-the-art databases and analytical tools to provide clients with detailed market intelligence. Learn more at ponderosa-advisors.com.