Judge: U.S. dam owners must pay riverbed rents to Montana

A Montana state judge has declared dam owners Avista Corp., PacifiCorp, and PPL Montana LLC are not exempt from paying rent to Montana for the use of state-owned riverbeds occupied by their federally licensed hydro projects. The Montana attorney general’s office said the amount of money has not been calculated.

At the state’s request, Montana District Judge Thomas Honzel issued a summary judgment April 14, voiding the utilities’ major contentions in a lawsuit to prevent the state from collecting rent for the riverbeds. A summary judgment decides a case quickly on issues of law, without the need to debate issues of fact.

The court found the Federal Power Act and federal navigational servitude do not pre-empt the state’s claim for compensation under a Montana hydro licensing law.

Federal Power Act establishes dual federal-state control

Honzel said the Federal Power Act establishes a system of dual control under which the federal government possesses a superior right to regulate hydroelectric projects, but states retain traditional jurisdiction over property. Although the state cannot regulate a hydro project, nothing prevents the state from obtaining rental compensation, he said. Montana law requires a licensee to pay rent based on full market value and interest.

State authority over navigable riverbeds also is subject to federal navigational servitude — the power of Congress to ensure navigable waters remain open to commerce. Honzel said the FPA does not invoke navigational servitude on behalf of hydropower licensees.

However, Honzel said his order does not relieve the state of its obligation to prove it owns the riverbeds or that land involved is school trust land, as provided by Montana’s Constitution.

A.G.: “Stop wasting time and money on litigation”

In response to the ruling, Montana Attorney General Mike McGrath said the FPA clearly does not pre-empt states from collecting rent for use of the beds and banks of navigable rivers.

“The companies need to get realistic about their liability in this case,” McGrath said. “The next step is to determine whether the rivers in question are navigable. We have no doubt that the state can prove that. It’s time to stop wasting time and money on unnecessary litigation.”

Honzel’s 18-page order also rejected the utilities’ request for a ruling that they held a prescriptive easement to use riverbeds. He said, in Montana, a private party cannot obtain a prescriptive easement across state land held in trust for the people.

Judge: State cannot waive rental payments

The judge also rejected the utilities’ assertion the state either waived its right to rental payments or breached agreements reached in the course of licensing. Honzel said the state cannot waive its right to rental payments and cannot enter into an agreement prohibiting the state from enforcing trust obligations.

Avista’s hydropower holdings in Montana include the 722.9-MW Clark Fork (No. 2058) project. PacifiCorp’s holdings include 4.15-MW Bigfork (No. 2632) and PPL Montana’s holdings in the state include the 326.9-MW Missouri-Madison River (No. 2188), 10-MW Mystic Lake (No. 2301), and 92.6-MW Thompson Falls (No. 1869) projects.

In 2004, U.S. District Judge Donald Malloy ruled the state has legal standing to sue hydro project owners for compensation for the use of state lands occupied by the projects, including riverbeds. After that ruling, it was determined the federal court had no further jurisdiction in the case, leaving the way open for the utilities’ lawsuit in state court.

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