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HELENA - The Montana Supreme Court ruled Tuesday that PPL Montana owes the state $41 million for past use of public riverbeds to generate electric power - and said the state can charge PPL additional, ongoing rent for the company's 10 hydroelectric dams.

The 5-2 decision means PPL Montana, which bought the dams from Montana Power Co. in 1999, may end up paying multimillion-dollar annual rent to the state from 2008 and into the future, as well as nearly $8 million in interest, state officials said.

"Today's decision is a victory for generations of Montanans and confirms what we've known all along: Our rivers belong to the people of Montana, not out-of-state corporations," Attorney General Steve Bullock said. "In the future, power companies that want to use our streambeds to make hundreds of millions of dollars will have to pay full-market value."

PPL Montana spokesman David Hoffman said the company is disappointed by the ruling, but was still examining the 107-page decision and dissent.

"We're not sure how we'll react," he said.

The $41 million owed by PPL Montana will go into the state's public land trust, but it hasn't been determined precisely how that money may be distributed, state officials said.

The state Land Board now has the power to decide what rent PPL would pay from 2008 forward. State law also says 10 percent annual interest is charged on any judgment that isn't paid, so PPL appears to owe about $4 million a year on its $41 million in back rent, which was determined by a state district judge in June 2008.

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The high court's decision Tuesday ruled on many issues in the complex, 6 1/2-year-old case, but turned primarily on whether the state owned the riverbeds on which PPL Montana's dams were located.

At issue was whether the Missouri, Madison and Clark Fork rivers were "navigable" at the time of Montana's 1889 statehood, thus granting the state ownership of the streambed.

District Judge Thomas Honzel of Helena ruled in the state's favor on the navigability issue in August 2007 and the Supreme Court upheld his decision.

"The concept of navigability for title purposes is very liberally construed by the U.S. Supreme Court," Justice Pat Cotter wrote for the five-person majority. "A river does not have to experience ‘actual use' at or before the time of statehood, so long as it was ‘susceptible' of providing a channel for commerce."

But Justice Jim Rice wrote in his dissent that PPL provided plenty of contrary evidence showing that stretches of river straddled by the dams were not navigable, such as the Great Falls of the Missouri, which are the site of five of the present-day dams.

The issue of navigability should have been decided after a trial that examined the conflicting evidence, rather than the District Court ruling for the state in a summary judgment, Rice said.

"The (Supreme) Court's decision ... makes one wonder just what evidence the court would have considered sufficient for PPL to defeat summary judgment in this case," he wrote. "... This court has steadfastly guarded against depriving a party of the right to trial by the improper entry of summary judgment.

"Today, I believe we step back from the protection of that right."

District Judge Mike Salvagni of Bozeman, sitting in for Justice Brian Morris, joined Rice in his dissent.

Joining Cotter in the majority were justices James Nelson and William Leaphart, and district judges Kurt Krueger of Butte and Ed McLean of Missoula. Krueger substituted for Chief Justice Mike McGrath and McLean sat in for retired Justice John Warner.

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The case began in 2003, when several parents of Montana schoolchildren, with the help of lawyers in Bozeman and Helena, sued PPL and other power generators in federal court, seeking compensation for use of Montana riverbeds at 10 hydroelectric dams.

The suit argued that the riverbeds are school trust lands and that anyone using them must pay rent to the state.

The state joined the lawsuit in 2004 and later filed its own case in state court, seeking back rent from PPL and the right to charge rent in the future.

Two other power generators, Avista Corp. of Spokane and PacifiCorp of Portland, Ore., settled with the state and agreed to pay rent on riverbeds occupied by their respective dams. Avista is paying $4 million a year for its Noxon Rapids dam on the Clark Fork River near the Montana-Idaho border and PacifiCorp pays a minimal rent for its small dam on the Swan River near Bigfork.

PPL decided to fight the issue in court. A year after Honzel ruled that the rivers involving PPL are navigable and therefore the streambeds are owned by the state, he ruled that the state had properly calculated $41 million in back rent that PPL owed from 2000 to 2007.

The Supreme Court also upheld Honzel's ruling on the back rent calculation.

Missoulian State Bureau reporter Mike Dennison can be reached at 1-800-525-4920 or at mike.dennison@lee.net.

 

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