If the Creek Don't Rise — Montana's Right to Rental for Riverbeds Used by Power Company's Dams Now Before the U.S. Supreme Court – PPL Montana, LLC v. State of Montana

The U.S. Supreme Court will take up another Montana river case. The case involves a dispute between the State of Montana and a power company that purchased dams on several Montana rivers, which are licensed under the Federal Power Act by the Federal Energy Regulatory Commission. The last time Montana visited the U.S. Supreme Court, it lost to Wyoming in a dispute over water usage under the Yellowstone River Compact. This time Montana stands to gain $41,000,000 as fair market rental for its river beds granted on summary judgment and upheld by the Montana Supreme Court. The power company, PPL Montana, LLC, is a wholesale electric generator (exempt from public utility regulation) who owns several federally licensed dams on various rivers in Montana. At issue is the ownership of over 500 miles of rivers and 5,600 acres of riverbed under dams and reservoirs associated with two federally licensed hydroelectric facilities on the upper Missouri, Madison and Clark Fork Rivers in Montana. Most of the dams were constructed between 1891 and 1930 and the projects were approved in 1949 and 1956 under the Federal Power Act. According to the Montana Supreme Court, the riverbeds belong to the State of Montana. When the original 13 states became sovereign, they gained absolute right to all navigable rivers and the lands beneath them for public use. All states joining the Union thereafter were put on equal footing with the original thirteen and so acquired the same rights. Thus Montana's ownership depends upon whether the rivers were navigable when the Montana joined the union, i.e. 1889. Navigability basically means whether a log can float downstream. If so, it is commercially navigable. PPL had argued that under US Supreme Court precedent, the issue of navigability for title purposes required a section by section test where there were relevant non-navigable sections of the river at the time of statehood. The trial court had concluded that a section by section analysis was not necessary and that based on current conditions of recreational usage on parts of the rivers, the entire rivers were navigable in 1889. By owning the dams, the Montana Supreme Court held that PPL uses the riverbeds both above and below the dam. PPL acquired the dams in l999 and is charged for the usage between 1999 and 2007 at the time of the trial. PPL filed a petition on two grounds: one is the State's determination of navigability was flawed and the other is that a license under the Federal Power Act preempts that State's right to seek compensation. Indeed, PPL noted that it currently pays the federal government over $500,000 in annual charges for the "use, occupancy and enjoyment" of federal lands, which includes the riverbeds held by the Montana Supreme Court to belong to the state. Although at first glance, the dispute between a hydroelectric power company and a state may seem esoteric, the case could prove to have more extensive ramifications preemption and the interplay between federal and state authority. John H. Klock is a Director in the Gibbons Real Property & Environmental Department.

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