Bostwick Propert., Inc. v. Dept. of Natural Res. and Conservation

• Citation: 208 P.3d 868,2009 MT 181,351 Mont. 26
• Decision Date: 21 May 2009
• Docket Number: No. DA 08-0248.,DA 08-0248.
• Parties: BOSTWICK PROPERTIES, INC., Petitioner and Appellee, v. MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellant.
• Court: United States State Supreme Court of Montana

208 P.3d 868

2009 MT 181

351 Mont. 26

BOSTWICK PROPERTIES, INC., Petitioner and Appellee, v. MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent and Appellant.

No. DA 08-0248.

Supreme Court of Montana.

Argued and Submitted April 22, 2009.

Decided May 21, 2009.

For Appellant: Anne W. Yates (argued), Brian Bramblett, Candace F. West, Montana, Department of Natural Resources and Conservation, Helena, Montana.

For Appellee: Brian K. Gallik (argued), Trent M. Gardner, Goetz, Gallik & Baldwin,

P.C., Bozeman, Montana, Matthew Williams, Williams & Jent, PLLP, Bozeman, Montana.

For Amicus Curiae PPL Montana, LLC: Holly Jo Franz (argued), Franz & Driscoll, PLLP, Helena, Montana.

For Amicus Curiae Montana Department of Fish, Wildlife & Parks: Robert N. Lane, Rebecca Jakes Dockter, Montana Fish, Wildlife & Parks, Helena, Montana.

For Amicus Curiae Montana Trout Unlimited: Stan Bradshaw, Montana Trout Unlimited, Helena, Montana, Laura S. Zeimer, Montana Trout Unlimited, Bozeman, Montana.

For Amicus Curiae Association of Gallatin Agricultural Irrigators: David Weaver, Nash, Zimmer, Weaver & Grigsby, Bozeman, Montana.

For Amicus Curiae Montana Association of Realtors® and Montana Building Industry Association: John E. Bloomquist, Abigail J. St. Lawrence, Doney Crowley Bloomquist Payne Uda, P.C., Helena, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 The Montana Department of Natural Resources and Conservation (DNRC) appeals an order from the Eighteenth Judicial District Court granting a writ of mandamus, or writ of mandate, to Bostwick Properties, Inc. (Bostwick). This writ directed DNRC to issue a water use permit to Bostwick for the construction of a municipal water system for the Lazy J South subdivision, which Bostwick is developing in Gallatin County. We reverse the District Court's issuance of the writ and remand this matter for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 On December 22, 2005, Bostwick filed an application with the DNRC for a water use permit in order to use water from an aquifer for the Lazy J South subdivision. Prior to submitting the application, Bostwick had conducted drilling and extensive testing of this aquifer which is located approximately 1300 feet below the earth's surface.

¶ 3 DNRC is the state agency responsible for issuing water use permits. The requirements for such permits are set forth in Title 85, chapter 2, part 3 of the Montana Code Annotated. The first step in this process requires the person or entity seeking a water permit to file an application with DNRC. Section 85-2-302, MCA. Once DNRC has determined the application is "correct and complete," DNRC then provides public notice of the application and gives other parties an opportunity to file objections. Sections 85-2-307 and -308, MCA. If the DNRC determines that valid objections are presented, it then holds a contested case hearing pursuant to the Administrative Procedure Act, Title 2, chapter 4, part 6. Section 85-2-309, MCA.

¶ 4 If no objections have been received, DNRC has 120 days from the last date of publication of notice to either "grant, deny, or condition" the application. Section 85-2-310(1), MCA. If objections have been received or a hearing has been held, then DNRC has 180 days from the last date of publication of notice to do the same. Section 85-2-310(1), MCA. The DNRC also has the discretion to extend these deadlines by 60 days. Section 85-2-310(1), MCA. DNRC is prohibited from denying or modifying a permit "unless the applicant is first granted an opportunity to be heard." Section 85-2-310(3), MCA. Accordingly, "[i]f an objection is not filed against the application but the department is of the opinion that the application should be denied or approved in a modified form or upon terms, conditions, or limitations specified by it, the department shall prepare a statement of its opinion and its reasons for the opinion." Section 85-2-310(3), MCA. DNRC is required to then serve this statement of opinion upon the applicant, giving the applicant an opportunity to request a hearing on the application within 30 days after notice of the statement of opinion has been mailed. Section 85-2-310(3), MCA.

¶ 5 The criteria for evaluating whether to issue, deny, or condition a water use permit are found in § 85-2-311, MCA, and read as follows:

85-2-311. Criteria for issuance of permit. (1) A permit may be issued under this part prior to the adjudication of existing water rights in a source of supply. In a permit proceeding under this part, there is no presumption that an applicant for a permit cannot meet the statutory criteria of this section prior to the adjudication of existing water rights pursuant to this chapter. In making a determination under this section, the department may not alter the terms and conditions of an existing water right or an issued certificate, permit, or state water reservation. Except as provided in subsections (3) and (4), the department shall issue a permit if the applicant proves by a preponderance of evidence that the following criteria are met:

(a) (i) there is water physically available at the proposed point of diversion in the amount that the applicant seeks to appropriate; and

(ii) water can reasonably be considered legally available during the period in which the applicant seeks to appropriate, in the amount requested, based on the records of the department and other evidence provided to the department. Legal availability is determined using an analysis involving the following factors:

(A) identification of physical water availability;

(B) identification of existing legal demands on the source of supply throughout the area of potential impact by the proposed use; and

(C) analysis of the evidence on physical water availability and the existing legal demands, including but not limited to a comparison of the physical water supply at the proposed point of diversion with the existing legal demands on the supply of water.

(b) the water rights of a prior appropriator under an existing water right, a certificate, a permit, or a state water reservation will not be adversely affected. In this subsection (1)(b), adverse effect must be determined based on a consideration of an applicant's plan for the exercise of the permit that demonstrates that the applicant's use of the water will be controlled so the water right of a prior appropriator will be satisfied;

(c) the proposed means of diversion, construction, and operation of the appropriation works are adequate;

(d) the proposed use of water is a beneficial use;

(e) the applicant has a possessory interest or the written consent of the person with the possessory interest in the property where the water is to be put to beneficial use, or if the proposed use has a point of diversion, conveyance, or place of use on national forest system lands, the applicant has any written special use authorization required by federal law to occupy, use, or traverse national forest system lands for the purpose of diversion, impoundment, storage, transportation, withdrawal, use, or distribution of water under the permit;

(f) the water quality of a prior appropriator will not be adversely affected;

(g) the proposed use will be substantially in accordance with the classification of water set for the source of supply pursuant to 75-5-301(1); and

(h) the ability of a discharge permitholder to satisfy effluent limitations of a permit issued in accordance with Title 75, chapter 5, part 4, will not be adversely affected.

(2) The applicant is required to prove that the criteria in subsections (1)(f) through (1)(h) have been met only if a valid objection is filed. A valid objection must contain substantial credible information establishing to the satisfaction of the department that the criteria in subsection (1)(f), (1)(g), or (1)(h), as applicable, may not be met. For the criteria set forth in subsection (1)(g), only the department of environmental quality or a local water quality district established under Title 7, chapter 13, part 45, may file a valid objection.

¶ 6 After filing the application, Bostwick's hydrologists entered into communications with DNRC concerning its application. In July 2006, DNRC terminated Bostwick's application for allegedly taking too long to submit certain information which DNRC required. On November 30, 2006, Bostwick filed another application for a new water use permit for the same aquifer. On January 29, 2007, DNRC sent Bostwick a letter identifying technical deficiencies with its application. Bostwick subsequently submitted additional information.

¶ 7 On February 13, 2007, DNRC issued a document directing that public notice be given of Bostwick's application. At this point in the application process Bostwick's application was considered "correct and complete," see §§ 85-2-307 and -308, MCA, meaning "that the information required to be submitted conforms to the standard of substantial credible information and that all of the necessary parts of the form requiring the information have been filled in with the required information." Section 85-2-102(8), MCA. Notice was published and the Department of Fish, Wildlife, and Parks (DFWP) and Montana Trout Unlimited (Trout Unlimited) both filed timely objections based on concerns of potential depletions or reductions to instream flow needs in the Gallatin River which might arise from Bostwick's proposed use of water. Bostwick later settled with DFWP and Trout Unlimited and both parties withdrew their objections. Bostwick notified DNRC of this settlement.

¶ 8 On July 18, 2007, Bostwick received another application review form from DNRC. Bostwick's hydrologists reviewed the form and provided additional information to the DNRC about its permit application and related groundwater system. By August 2007, more than 180 days had elapsed since the publication of Bostwick's application for a water use permit, yet DNRC had not...