BEFORE THE DEPARTMENT OF NATURAL RESOURCES

AND CONSERVATION OF THE STATE OF MONTANA

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In the matter of the amendment of ARM 36.12.102, forms and ARM 36.12.103, form and special fees

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NOTICE OF AMENDMENT �

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To: All Concerned Persons

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1. On December 20, 2007, the Department of Natural Resources and Conservation published MAR Notice No. 36-22-125 regarding a notice of public hearing on the proposed amendment of the above-stated rules at page 2075 of the 2007 Montana Administrative Register, Issue No. 24.

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2. The department has amended ARM 36.12.102 and 36.12.103 exactly as proposed.

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3. The following comments were received and appear with the department's responses:

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COMMENT 1

Through this "rulemaking" attempt, the department is placing the entire cost burden of water protection on CGA petitioners by asking them to pay unrealistic fees, with the DNRC setting all the ground rules on what petitioners must pay for. Particularly egregious is Section 1.l.v which states "other costs of holding the hearing, conducting investigations or studies, and making records pursuant to 85-2-506 and 85-2-507, MCA, except the cost of salaries of the department personnel."

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Investigations or studies cost thousands of dollars and are the responsibility of DNRC as legislatively mandated in 85-2-507(5)(b), MCA, which states, "During the 2-year period and any extensions of the time period, studies necessary to obtain the facts needed to assist in the designation or modification of a permanent controlled ground water area must be commenced under the supervision and control of the department. Facts gathered during the study period must be presented at a hearing prior to the designation or modification of a permanent controlled ground water area."

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RESPONSE 1

The water resources statutes set forth many powers and duties that may be implemented by the Department of Natural Resources and Conservation. All of the department's duties and powers are not funded by the Legislature. The department has limited resources and therefore must prioritize the services that it can provide. Some services must be provided by the department because they cannot be performed by the public. The section of statute noted in the comment is interpreted by the department to mean that the department must ensure that the hearing order is followed and that the department provide guidance (supervision and control) over fact gathering, analysis, or modeling used during the study period. By providing guidance of the study, both proponents and opponents understand what information the department believes is necessary to evaluate whether a controlled groundwater area would be designated and can avoid extra expense by having to go back and repeat the study.

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The department does not believe the statute requires the department perform the study tasks. There are other statutes which focus on groundwater assessments and there are members of the public that have the expertise to complete the necessary requirements in a controlled groundwater area petition.

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In 1991, the Legislature established a groundwater steering committee (85-2-902(2)(b), MCA), which was charged with producing and maintaining longterm records of groundwater chemistry and water level changes throughout the state. The committee sets the priorities for the Montana Bureau of Mines and Geology which gathers the technical data, analyzes, and compiles the groundwater information. Many areas of the state have been completed (see Ground Water Assessment Program at http://www.mbmg.mtech.edu/grw/grwassessmemt.asp.).

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COMMENT 2

This is a clear attempt by DNRC to abrogate its responsibilities under current Montana Code. The department is flouting the legislative intent of the Controlled Groundwater Area (CGA) statute. They were thwarted during the 2007 session in attempting to place the financial and legal burden on aggrieved citizens. DNRC is now making an attempt to circumvent the legislative process for its own agenda.

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RESPONSE 2

The proposed legislation was supported by the department because it set forth an administrative rules process similar to that found in 85-2-319, MCA, for highly appropriated surface water basins. The department provided projections that showed a rules process would reduce costs to petitioners by 75 percent. The proposed fee increase was based on the services required for evaluation of the petition, which greatly exceed the evaluation of a permit or change application.

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COMMENT 3

The DNRC attempting to raise fees from $500 to $1500 for citizens filing a petition for a controlled groundwater area is outrageous! People who are not well-off, but are trying to protect their water rights might not be able to come up with such a fee. DNRC is mandated by law to hear these petitions, not sell them to the highest bidder!

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RESPONSE 3

Please refer to Response 1.

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COMMENT 4

We already pay for DNRC's services with our tax dollars.

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RESPONSE 4

A portion of the funding for water rights is through the General Fund, however 23 percent of the funds for water right services must be generated from water right filing fees. The proposed fees would generate that 23 percent needed to maintain services in the increasingly complex arena of water resource management.

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COMMENT 5

With the inclusion of additional petitioner paid copies, postage, etc., it is as if DNRC is attempting to eliminate the CGA process altogether; the last hope for residents like us who have valid concerns about their water.

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RESPONSE 5

The items included in comments are already referred to in the existing rule. In this rule proposal, the department clarified what costs were the responsibility of the petitioner so that the items billed to petitioners were the same from petition to petition. One must recognize however, that the actual costs for the various petitions will vary because of the size of the area chosen to be closed; the location of the proposed closed area; and the number of opponents and controversy surrounding the petition. Permit and change applicants also incur additional expenses depending on the complexity of the application proposal.

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COMMENT 6

At a time when working with residents would seem more prudent than ever, DNRC chooses to raise fees, making it difficult for average people to have any interaction or say in the management of a dwindling resource. It seems incomprehensible to us that as our water resources continue to erode, the state agency charged with conservation of such perpetuates a management style that hastens the process.

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RESPONSE 6

The department believes that in addition to the CGA petition process, there are other groundwater monitoring projects in place that will help to ensure wise management of Montana's groundwater resources. Also, please refer to Response 1.

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COMMENT 7

We respectfully request that DNRC look elsewhere to enhance its revenue stream.

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RESPONSE 7

Please see Response 4.

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COMMENT 8

Any changes should make the process simpler and less costly to the citizen.

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RESPONSE 8

As Montana grows and water supply diminishes, the processes employed by the department have necessarily become more complex, and the services provided by the department more costly.

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COMMENT 9

I am very disturbed that DNRC personnel did not implement fairness into the rules, but rather increased the burden on petitioners with the "open checkbook" policy of uncapped expenditures. Petitioners need to know if they can afford a process before they commit to it with their time and money.

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RESPONSE 9

The department did not intend to imply that costs for a CGA petitioner would go unchecked. Please refer to Response 5.

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COMMENT 10

Opponents and DNRC need a reason to keep costs low since they have the ability to increase the expenses. As currently written and proposed, petitioners' checkbooks are at the mercy of DNRC and opponents. Neither have motivation to keep the tab small. An amendment is needed to share expenses with all who are involved.

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RESPONSE 10

The petition to designate a CGA will likely have petitioners who want a CGA sparring with opponents who do not. The very process is controversial. In this proceeding where there are those for, and those against a proposal, each side is responsible for its own costs incurred to support its opinion. Those proposing a closure should bear the cost of the proceeding because they initiated the process and controlled the scope of the proposed closure.

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COMMENT 11

Establish a cap on ALL expenses: meeting room and electronics, copy costs, etc. Require meetings/hearing use government buildings verses expensive private rentals.

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RESPONSE 11

It would be difficult to place a maximum amount on various costs incurred in a controlled groundwater petition process. Meeting rooms are difficult to find in some locations and can be expensive, but can be found for free in others. The department has considered holding all hearings in Helena, where meeting room and electronic recording costs might be eliminated. 85-2-506, MCA, however, requires that CGA proceedings be held in the area of the proposed CGA. In the past, department staff made the required file copies and petitioners were charged $0.25 a page, which could be very costly if the petition file was large. The department has changed its practice; now the department takes the file to a local printer where copy costs range from $0.07 to $0.15 per page. The petitioners pay only the amount charged to the department.

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COMMENT 12

The department should require all petition material be posted on DNRC web site versus mailed in paper form. Copies of motions/responses to full party lists (Certificate of Service) should be posted on the web site instead of mailed.

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RESPONSE 12

This is a good suggestion, and as technology evolves may be implemented. At this time however, not all members of the public have computers or e-mail access. The department will explore this option, and may be able to e-mail those who have access, and mail hard copies to those who do not. However, some statutes like 85-2-506, MCA (CGA), expressly require notice by mail.�

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COMMENT 13

Setting no limits on running the bill up for aggrieved citizens who are trying to fight the good fight for us all is not a good thing.

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RESPONSE 13

Please refer to Responses 5, 10, and 11.

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COMMENT 14

I believe the proposed rule change unjustly creates a system of "haves" and "have-nots," which runs counter to our constitutional commitment to liberty and justice for all. DNRC seems to have lost sight of the public trust doctrine and the fundamentals of public service. The result will make it more likely that water will continue to flow uphill toward money. New development will gain more advantage over senior water rights as the system drifts further away from the needs of average Montanans.

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RESPONSE 14

Please refer to Responses 4 and 8.

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COMMENT 15

Under the provisions of 15-6-206, MCA, water rights are tax-exempt. While I am certain DNRC believes strongly in its justification for raising processing fees, from a water rights owner's perspective this is a tax: nothing more than a tax on water rights.

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RESPONSE 15

Please refer to Response 4.

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COMMENT 16

In my opinion, excessive costs associated with DNRC's petition/permit/application procedures are a result of inefficient and ineffective programs designed and perpetuated by the agency. Before raising fees, DNRC should revisit its programs and procedures to discover where improvements could lower costs for the agency and for water rights owners.

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RESPONSE 16

The department appreciates the commenter's suggestion and regularly evaluates processes to ensure that they remain effective and efficient.

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COMMENT 17

DNRC appears to have a special passion for taxing Controlled Groundwater Area Petition (Form No. 630, $1500), Closure of a Highly Appropriated Basin Petition (Form No. 63, $1500), and Water Reservation Application for Instream Flow (Form No. 638, $800). When considered together, these three administrative procedures represent the most effective regulatory mechanisms available to Montana citizens seeking statutory enforcement and/or protection against over-appropriation of groundwater and surface water.

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RESPONSE 17

CGA and highly appropriated basin petitions are a mechanism that can be used by water users when facts presented by petitioners show that the criteria under 85-2-506, MCA, are occuring. A CGA petition, if granted, may place strict requirements on current and future water users; however, a petition is not the only mechanism that may ensure protection against over-appropriation. An applicant seeking a new beneficial water use permit must meet criteria that includes proving water is legally available for the applicant's use and will not create an adverse effect to senior water users. In the case of surface water, users can petition the district court for a water commissioner who, under the direction of the court, allocates water to the individuals on the source. The three referenced proceedings can be particularly resource intensive because of the large number of the public potentially affected by the action required of the department.

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COMMENT 18

There are reasonable alternatives to fee increases which have not been considered. The DNRC could ask for appropriated dollars to pay for increased needs and expenditures associated with an expanding population and additional demands on the state's water resources. Apparently, no alternative revenue strategies are being seriously considered.

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RESPONSE 18

Please refer to Response 4.

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COMMENT 19

It is unclear to me how more revenue will help solve the most pressing programmatic problems facing DNRC. Unfortunately, the public hearing notice contains no background details, assumptions, or analysis. It is difficult to understand the thought process that led DNRC to the proposed amendment.

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RESPONSE 19

Please see Response 4.

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COMMENT 20

Commenter does not support or oppose the proposed fee increases, but believes the fee for filing an Objection to Application should be raised commensurate with the rest of the fees.

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RESPONSE 20

The department places a small fee on those who oppose an application to help defray a small part of the services provided because it was not the objector who initiated the process and the objector must defend his or her interest.

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COMMENT 21

Commenter opposes the amendment of ARM 36.12.102 to abolish Form No. 627, "Notice of Exempt Water Right". Although existing rights for livestock and individual domestic uses based upon instream flow or groundwater sources are exempt from the filing requirements of 85-2-221, MCA, such claims may be voluntarily filed (85-2-222, MCA). Discontinuing the use of Form No. 627 does not change either of the statutes passed by the Legislature, and therefore cannot prohibit owners of exempt water rights from either owning a valid exempt water right or from filing some sort of notice to the department and other water users. Additionally, under the Montana Water Use Act, the DNRC does not have the authority to reject notice of an exempt water right.

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The Montana Constitution, Article IX, Section 3 states that the Legislature shall provide for the administration, control, and regulation of water rights and shall establish a system of centralized records. The Legislature delegated that duty to the department in 85-2-112, MCA. Those duties included prescribing procedures, forms, and requirements for applications, permits, certificates, claims of existing rights; establishing and keeping in its Helena office a centralized record system of all existing rights, and a public record of permits, certificates, claims of existing rights, applications, and other documents filed under this chapter; and cooperating, assisting and advising in matters pertaining to measuring water or filing claims of existing rights with a district court 85-2-112(2), (3), and (5), MCA.

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If Form No. 627 is discontinued, the owners of exempt water rights still have the right to notify the department of an exempt water right; however, the department will lose the $50 filing fee for the form as well as a uniform notice of the water right to assist the department in one of its primary tasks -- keeping a centralized record system of all existing water rights. If the department exceeds its authority by refusing to keep track of the exempt water rights, the owners will be deprived of notice of water developments or water right changes that may affect them. Also, applicants for new beneficial water use permits or changes in an existing water right will be affected by the lack of information regarding exempt water rights in that they will be hard-pressed to determine legal availability of a source or to analyze adverse effects without a record of all rights.

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RESPONSE 21

In the late 1970s, the Legislature decided to exempt certain water uses from the filing requirements of the adjudication ("exempt" water rights). Pursuant to 85-2-212, MCA, and Montana Supreme Court Order No. 14833, a person asserting a claim to an existing right to the use of water arising prior to July 1, 1973, for stock or domestic uses based upon instream flow or groundwater sources was not required to file a claim in order to avoid abandonment of the claim, but could voluntarily file.

While these types of claims were exempt from the filing requirements, it did not mean that they were not valid water rights, or that they would be deemed abandoned if not filed (In re Adjudication of Existing Yellowstone River Water Rights (1992), 253 Mont. 167,832 P.2d 1210). What was not addressed in 1979, however, was any kind of process that described where and how such exempt rights could be established later on, which court had jurisdiction, and what the process was for proving them. The claims filing period ended April 30, 1982, but later extended to July 1, 1996 (see 85-2-221(3), MCA).

At this point any water user who did not file claims for exempt water rights faces the issue of how to establish judicially their water right. If a water user tries to file a claim with the district court, the district court will most likely say it does not have jurisdiction to adjudicate exempt water rights; only the Water Court can adjudicate water rights (Mildenberger v. Galbraith, (1991), 249 Mont. 161, 166, 815 P.2d 130, 134; State ex rel. Jones v. District Court, (1997), 283 Mont. 1, 7, 938 P.2d 1313, 1316; Hidden Hollow Ranch v. Fields, 2004 MT 153, 27, 321 Mont. 505, 513, 92 P.3d 1185, 1191). Section 85-2-216, MCA, further states that, "all matters concerning the determination and interpretation of existing water rights shall be brought before or immediately transferred to the water judge in the proper water division�" If someone tries to file such exempt water rights with the Water Court, the Water Court could likely find that the claims filing period concluded July 1, 1996, and that it does not have jurisdiction to accept, process, and adjudicate those claims within this adjudication. Although valid, exempt rights not voluntarily filed are not abandoned because they were not filed. However, at present, there is no clear forum in which they can be proved and adjudicated. Anyone trying to go to either the district court or the Water Court would likely face expensive litigation costs just to try to establish which court has jurisdiction.

The department allowed exempt water users to file a Form No. 627, Notice of Exempt Water Right for notice purposes only. This is not a form that puts the water rights into the general adjudication conducted by the Water Court. The department has no authority for creating or receiving this form.

In essence, a Form No. 627 is simply a piece of paper on file with the department. It is not a claim in the adjudication, and the department's acceptance of the Form No. 627 in no way establishes or confirms a water right. Many water users, however, are under the mistaken impression that filing a Form No. 627 confirms or establishes an exempt water right.

Commenter notes that "�owners will be deprived of notice of water developments or water right changes that may affect them" and "applicants for new beneficial water use permits or changes in an existing water right will be affected by the lack of information regarding exempt water rights..." Statute requires that water right applications be published "� in a newspaper of general circulation in the area of the source." An owner of an exempt water right can obtain information about new water right applications from that publication.

The department does not want to promote the impression that filing a Form No. 627 establishes or confirms a water right and is removing the form.

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COMMENT 22

Commenters raised many issues pertaining to the processing of controlled ground water areas, but which do not pertain to this proposed form and fee rules adoption.

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RESPONSE 22

The department did not provide a response to issues not pertaining to the form and fee rules adoption.

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DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION

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/s/ Mary Sexton�������������������/s/ Anne Yates

MARY SEXTON������������������ANNE YATES

Director�������������������������������Rule Reviewer

Natural Resources and Conservation

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Certified to the Secretary of State on February 4, 2008.