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HELENA - PPL Montana must pay the state rent, including more than $40 million in back rent, for use of the riverbeds where hydroelectric dams sit, District Judge Thomas Honzel has ruled.

The utility was fighting the state's attempt to receive payment for using the stream bed in navigable rivers. The state earlier reached settlements with PacifiCorp and Avista.

"We tried very hard to settle this case with PPL," Attorney General Mike McGrath said Monday.

Honzel said the state is entitled to $34.7 million in compensation from PPL Montana for the years 2000 though 2006, and another $6.2 million in compensation for 2007. In addition, the company must negotiate a lease with the state for the future use of riverbeds, he said.

Honzel adopted the state's recommendation for a formula for determining rent. The formula is based on profits PPL Montana makes using state land to generate electricity, McGrath said.

He called Honzel's decision "great news for the people of Montana."

"If you use state land for grazing leases, or if you develop oil and gas on state land, or even if you build a bridge on state land or have an irrigation project, you have to pay a fee and you get an easement to do that," McGrath said. "These hydroelectric companies have never ever done that.

"The significance is hydroelectric companies will be treated the same as everybody else under this ruling."

PPL Montana had argued that the dams were governed by the federal licenses it held for the projects, and were not subject to the state claims.

Company spokesman David Hoffman said Monday that PPL is still examining Honzel's ruling and has not yet decided if it will appeal.

"But I can say we think it's a bad decision," he said. "It's wrong. It attempts to overturn 100 years of water rights law."

Hoffman said the ruling could force other river users - from farmers to stockmen to recreationists - to pay for their use.

"The implications for other water users could be huge," he said.

Assistant Attorney General Anthony Johnstone has countered that the dam owners use much more land than irrigators and other users.

"This isn't about water, it's not about water law, it's not going to effect anybody else's water rights or irrigators whatsoever," McGrath said. "The purpose is to treat hydroelectric companies like everybody else."

Honzel previously ruled that land under the dams is state school trust land and has rejected a claim from the companies that the rivers should not be considered navigable, which can determine ownership. He ruled against the state on its claim that the land submerged by reservoirs should also be considered school trust land.

The dispute began in October 2003 when two Gallatin County residents, later joined by the state and Great Falls elementary and high school districts, sued the utilities for compensation for use of the riverbeds for their dams. They argued that the state riverbeds are part of the school trust lands, but the utilities hadn't paid to use them.

The courts later said only the state had standing in the case, and the others were removed from the lawsuit.

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