(1) If a water right is or has been developed on state land by the lessee or licensee for use on the leased or licensed land, such water right shall belong to the state. The lessee or licensee shall be entitled to compensation for the reasonable value of the improvements associated with the water right by any new lessee, licensee, or purchaser if such improvements are sold to a new lessee or licensee or purchaser as provided in ARM 36.25.125. This shall not be construed to make the state liable for the value of any water right. Any water rights hereafter secured by the lessee and licensee on state lands shall be secured in the name of the state of Montana.

(2) A lessee or licensee of state-owned land may not sell or otherwise dispose of a state-owned water right for any purpose. Such practices may constitute sufficient grounds for cancellation of the lease or license.