Bostwick Props., Inc. v. Mont. Dep't of Natural Res.

• Decision Date: 27 February 2013
• Docket Number: No. DA 12–0007.,DA 12–0007.
• Citation: 369 Mont. 150,296 P.3d 1154
• Parties: BOSTWICK PROPERTIES, INC., Petitioner and Appellant, v. MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent, Appellee and Cross–Appellant.
• Court: Montana Supreme Court

369 Mont. 150

296 P.3d 1154

BOSTWICK PROPERTIES, INC., Petitioner and Appellant,

v.MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, Respondent, Appellee and Cross–Appellant.

No. DA 12–0007.

Supreme Court of Montana.

Submitted on Briefs Dec. 12, 2012.

Decided Feb. 27, 2013.

For Appellant: Brian K. Gallik, Goetz, Gallik & Baldwin, P.C., Bozeman, Montana; Matthew W. Williams, Williams and Jent, PLLP, Bozeman, Montana.

For Appellee: Brian C. Bramblett, Anne W. Yates, Montana Department of Natural Resources and Conservation; Helena, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 Bostwick Properties, Inc. (Bostwick) sought a water use permit from the Montana Department of Natural Resources and Conservation (DNRC). DNRC denied the water use permit. Bostwick petitioned for review by the District Court. The District Court agreed with DNRC that Bostwick had failed to prove no net depletion of surface water and lack of adverse effect, as required by § 85–2–360, MCA, and therefore Bostwick was required to mitigate its water usage in order to receive a water use permit. The District Court further determined, however, that Bostwick had submitted an adequate mitigation proposal, and, therefore, DNRC improperly had denied Bostwick's permit application. The District Court further noted that DNRC had exhibited bias against Bostwick. The District Court separately affirmed each of DNRC's findings, and so determined that any bias on the part of DNRC caused no prejudice to Bostwick. Bostwick appeals, DNRC cross-appeals, and we affirm.

¶ 2 Bostwick and DNRC present the following issues on appeal:

¶ 3 Whether DNRC had authority to deny Bostwick's permit?

¶ 4 Whether DNRC and the District Court properly required Bostwick to mitigate its water usage?

¶ 5 Whether the District Court properly determined Bostwick's mitigation proposal was adequate as a matter of law?

¶ 6 Whether DNRC had the authority to require Bostwick to identify a specific water right for mitigation?

¶ 7 Whether DNRC bias substantially prejudiced Bostwick?

PROCEDURAL AND FACTUAL BACKGROUND

¶ 8 Bostwick filed an application for a Beneficial Water Use Permit with DNRC on December 1, 2006. Bostwick sought the water use permit for municipal use in its Lazy J South subdivision in Gallatin County, Montana. Bostwick initially sought up to 79 acre-feet per year of groundwater year round. Bostwick sought to extract this groundwater from an aquifer. DNRC designated Bostwick's water use permit application “correct and complete” on February 12, 2007, and noticed the application to the public. Montana Department of Fish, Wildlife, and Parks (FWP) and Montana Trout Unlimited (TU) objected to Bostwick's application. Both objectors later withdrew their objections provided that Bostwick reduced its water use to 76 acre-feet per year.

¶ 9 DNRC failed to take action on Bostwick's application within the timeframe set forth in § 85–2–310(1), MCA. Bostwick sought a writ of mandate to require DNRC to issue the water use permit, or, alternatively, to hold a hearing to force DNRC to show cause why DNRC would not grant the permit. After Bostwick sought the writ of mandate, DNRC issued a statement of opinion that denied Bostwick's water use permit. DNRC determined that Bostwick had failed to demonstrate no net depletion of surface water, as required by § 85–2–360, MCA, and had failed to prove legal availability and lack of adverse impact, as required by § 85–2–311, MCA. DNRC determined that Bostwick had demonstrated the other criteria required by § 85–2–311, MCA.

¶ 10 The District Court granted Bostwick's request for a writ of mandate. DNRC appealed to this Court. Bostwick Props. v. Mont. Dep't of Nat. Res. & Conserv., 2009 MT 181, 351 Mont. 26, 208 P.3d 868(Bostwick I). We reversed the District Court's grant of the writ of mandate. We determined that DNRC had no legal duty to grant Bostwick's permit application because Bostwick had not yet proven lack of adverse effect and legal availability. Bostwick I, ¶ 21. We remanded the case to DNRC with instructions to provide Bostwick with an opportunity to be heard on its water use permit application. Bostwick I, ¶ 23. Bostwick requested that DNRC disqualify itself to hear Bostwick's application on the grounds of bias. DNRC denied Bostwick's request for disqualification.

¶ 11 The Gallatin River is part of a closed water basin. Sections 85–2–342 to 85–2–343, MCA. In order to receive a groundwater permit, Bostwick first had to provide a hydrogeologic assessment to determine whether its proposed groundwater usage would result in a net depletion of surface water. Section 85–2–360, MCA. Bostwick would have to mitigate its water usage if Bostwick's proposed pumping of groundwater would result in a net depletion of surface water and adversely affect senior appropriators. Section 85–2–362, MCA.

¶ 12 Bostwick offered alternatives to demonstrate that its groundwater use would not result in a net depletion of the Gallatin River surface water, or would not cause an adverse effect. Bostwick first proposed that its Pave and Infiltrate Plan would offset all proposed consumption and would result in no net depletion of surface water. Bostwick next proposed that no net depletion would occur because the hydrological connection between the aquifer and the surface water was too attenuated and any potential adverse effect was unknown. Bostwick argued that the amount of water that it sought was too small to result in an adverse effect. Bostwick also suggested that DNRC could terminate Bostwick's water rights if Bostwick's de minimus water usage actually harmed senior rights holders. Bostwick finally proposed mitigation in the form of purchasing Water Right No. 41H 226700, in the event that Bostwick failed to demonstrate no net depletion or lack of adverse effect.

¶ 13 DNRC determined that Bostwick's water use would result in a net depletion of surface water, and that Bostwick had failed to demonstrate lack of adverse effect. This determination required Bostwick to mitigate its proposed water use. DNRC further determined that Bostwick's proposed mitigation, purchasing Water Right No. 41H 226700, was inadequate because the mitigation would provide only irrigation season water and would provide no non-irrigation season water. DNRC's determinations that Bostwick had failed to demonstrate no net decrease and had failed to demonstrate a lack of adverse effect for non-irrigation season water required Bostwick to mitigate non-irrigation season water loss as well.

¶ 14 Bostwick sought review by the District Court. The district court agreed with DNRC that Bostwick had failed to demonstrate no net depletion and lack of adverse effect. The District Court deemed adequate as a matter of law, however, Bostwick's mitigation proposal. The District Court determined that DNRC improperly had denied Bostwick's water use permit subject to implementation of Bostwick's mitigation plan. Bostwick appeals the District Court's determination that Bostwick failed to demonstrate no net depletion or lack of adverse effect. DNRC cross-appeals on the grounds that Bostwick's mitigation proposal did not mitigate non-irrigation season water use.

STANDARD OF REVIEW

¶ 15 We review for correctness a district court's review of an administrative agency's decision. BNSF Ry. Co. v. Cringle, 2010 MT 290, ¶ 11, 359 Mont. 20, 247 P.3d 706. We review for correctness a district court's conclusions of law. Cringle, ¶ 11.

DISCUSSION

¶ 16 Whether DNRC had authority to deny Bostwick's permit?

¶ 17 Bostwick argues that its settlement with all objectors required DNRC as a matter of law to grant Bostwick a water use permit. DNRC instead issued a statement of opinion that provided that Bostwick had failed to show no net decrease, pursuant to § 85–2–360, MCA, and to show legal availability and lack of adverse effect pursuant to § 85–2–311(1), MCA. Bostwick argues that DNRC's previous determination that Bostwick's application was “correct and complete” deprived DNRC of any further authority to issue a statement of opinion or to deny the permit after Bostwick settled with the objectors.

¶ 18 We considered and rejected this argument in Bostwick I. The District Court in Bostwick I concluded that DNRC was required, as a matter of law, to grant Bostwick's permit because DNRC had determined Bostwick's application was “correct and complete,” and all objections had been resolved. Bostwick I, ¶ 20. DNRC must grant a permit only if Bostwick resolved the objections and Bostwick proved the § 85–2–311, MCA, criteria by a preponderance of the evidence. Bostwick I, ¶ 21. Bostwick was required to prove legal availability and lack of adverse effect by a preponderance of the evidence. Bostwick I, ¶ 21. DNRC had legal authority, and the legal duty, to deny Bostwick's permit if Bostwick failed to do so. Bostwick I, ¶ 21.

¶ 19 Whether DNRC and the District Court properly required Bostwick to mitigate its water usage?

¶ 20 Bostwick offers four theories to support its argument that its water use would result in no net depletion of surface water or would not adversely affect senior appropriators. We analyze each in turn.

1. Bostwick's Pave & Infiltrate Plan

¶ 21 Bostwick first argues that its Pave and Infiltrate Plan would offset any net depletion of surface water from its proposed pumping of groundwater. Bostwick plans to pave roads and parking lots in its proposed development. Bostwick contends that precipitation that previously had evaporated or had been used by native plants would run off these new impermeable surfaces. Bostwick would store this runoff water in retention ponds. Bostwick would discharge this runoff water from the retention ponds into the groundwater, which in turn eventually would recharge the Gallatin River. Bostwick estimatedthat it would collect 42 acre-feet per year of runoff water. This “savings” represents more than the 39 acre-feet per year that Bostwick seeks to deplete with its...