Eldorado Co-op Canal Co., Lower Teton Joint Objectors, Farmers Cooperative Canal Co., Patrick Saylor
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Montana Water Court PO Box 1389 Bozeman, MT 59771-1389 1-800-624-3270 (In-state only) (406)586-4364 , :-j< i< ' ' ; _ FAX: (406) 522-4131 Montana iatif Coui IN THE WATER COURT OF THE STATE OF MONTANA UPPER MISSOURI DIVISION TETON RIVER BASIN (410) ******************** 41O-129 CLAIMANT: Eldorado Co-op Canal Co. 410 113467-00 OBJECTORS: Lower Teton Joint Objectors; Farmers Cooperative Canal Co.; Eldorado Co-op Canal Co. 410 113468-00 410 113469-00 410 113470-00 NOIA: Teton Coop Reservoir Co.; Farmers Cooperative Canal Co. 410 113472-00 410 113473-00 INTERVENER: Patrick Saylor 410 113474-00 410 113475-00 ORDER AMENDING MASTER'S REPORT AND ADOPTING AS AMENDED This Order resolves objections to a Master's Report issued on February 4, 2013. Although this Case involves eight water rights claims filed by Eldorado Cooperative Canal Company (ECCC or Eldorado), the sole purpose of the Master's Report was to address usage of the Bateman Ditch. Usage of the Bateman Ditch has directly or indirectly been at issue in separate but related cases in the Ninth Judicial District in Teton County, the Montana Supreme Court and in Water Court Cases 41O-131 and 41O-128. Giese v. Blixrud, DV 11-009, (Mont. Ninth Jud. Dist. 2011); Giese v. Blixrud, 2012 MT 170, 365 Mont. 598, 285 P.3d 458. Two parties in this Case, Patrick Saylor (Saylor) and Eldorado initially claimed a right to use the Bateman Ditch as a carrier for their water rights. Eldorado withdrew its claim for use of the Bateman Ditch as a point of diversion for its rights. Saylor maintains a claim to use the Bateman Ditch to deliver water to both downstream senior rights and his own rights. Saylor contends his use of the Bateman Ditch to supply downstream J- U _l senior users is a substitution or exchange plan and that such rights are protectable interests in Montana. A number of water rights in the upper Teton River were adjudicated over a century ago in Perry v. Beatty. Teton County District Court, Case No. 371 (Mar. 28, 1908). The most senior right from the Perry v. Beatty Decree was granted to an entity now known as the Choteau Cattle Company (hereafter CCC). Predecessors of CCC included McGillis and Hamilton Ranch, and the CCC water rights are sometimes referred to as the McGillis or Hamilton rights. The headgate for CCC is on the Burd or Hamilton Ditch, located on the Teton River and is downstream of other junior rights in the Perry v. Beattie Decree. The reach of the Teton River immediately upstream of the Burd Ditch is porous and loses water. Surface flows in this reach sometimes disappear during periods of low water availability. The Bateman Ditch crosses property owned by Patrick Saylor and is sometimes referred to as the Saylor Ditch. It diverts water above the losing reach of the Teton. Carriage losses for water transported in the Bateman Ditch are much lower than carriage losses in the natural channel of the Teton River between the Bateman and Burd Ditch head gates. For many years, the District Judge for the Ninth Judicial District has appointed a Water Commissioner to administer water rights in the Perry v. Beatty Decree. As early as the 1950s, and perhaps earlier, the Water Commissioner began using the Bateman Ditch to bypass the losing reach of the Teton River. Saylor Testimony, June 18, 2012, 2:31:08-2:31:58 and Leonard Blixrud Testimony, June 21, 2012, 3:54:55-3:57:16. Water was diverted into the Bateman Ditch and released back into the Teton River immediately above the Burd or Hamilton Ditch head gate. This practice enabled the Water Commissioner to satisfy CCC's senior rights without losing a substantial amount of water in the natural channel of the river. Bud Olson was a Water Commissioner who served three District Court Judges from 1963 to 2000. Mr. Olson remembers using the Bateman Ditch in lieu of the natural channel of the Teton River as early as 1964. The following excerpt from Mr. Olson's deposition describes this practice: Q: And how was water delivered down the Teton River to the Hamilton Ranch, while you were commissioner? A: When water was available, the water came right down the river to the head gate. When water was short, the ranchers agreed that we would run the water through Saylor ditch, and we would run it along the hillside through the Saylor ditch to the Hamilton head gate. Q: And the Saylor ditch, what side of the river is that on? A: That would be on the south side. Q; So the water - and what was the reason for running the water through the Saylor ditch as opposed to running the water, letting the water flow down the Teton River? A: If we ran the water down the river, all the other rights would be shut off. Q: To get the water to go down the river? A: To get the water to the Hamilton head gate. Q: So you say then that this practice running these early rights in the ditch as opposed to the river was a water ~ was to save water? A: We could, we could -- at Saylor's head gate; we could turn in 800 inches of water and have enough water to satisfy the 300 inches at the Hamilton head gate. If we ran it down the River, we would have to use maybe 4 or 5000 inches of water. Q: So you would have to shut more people down? A: Shut everybody down. Q: To get the water to A: To get the water to the Hamilton head gate. Saylor Ex. 5, Bud Olson Depo., pp. 30-31,1. 7-25 and 1 -11. 3 The senior right owned by CCC has a flow rate of 300 inches and a priority date of July 4, 1876.1 (Claim 410 187182-00) CCC initially claimed it could receive this right either through the Bateman Ditch, or via the natural channel of the Teton. It initially filed two claims (410 187182-00 and 410 187183-00) with two points of diversion one for the Burd Ditch and one for the Bateman Ditch. Prior to trial in 2009, CCC withdrew its claimed point of diversion for the Bateman Ditch. This change was made because claiming the Bateman Ditch as a point of diversion could have obligated CCC to absorb carriage losses starting at the Bateman Ditch rather than further downstream at the Burd Ditch. Carriage losses are typically measured at the point of diversion. Wheat v. Cameron, 64 Mont. 494, 501-02 210 P. 761, 763 (1922). In its withdrawal of its claimed point of diversion in the Bateman Ditch, CCC recognized historic use of the Bateman Ditch as a carrier for its rights and suggested an alternate approach to defining that practice: In Choteau's estimation, the use of the Bateman Ditch to divert its entitlements should be analyzed by the Court not as an alternate point of diversion per se for Choteau's water rights. Rather, it should be analyzed as an exchange plan fostered by those who benefit from the Bateman diversions. In other words, the actual claim should be that a certain amount of water is appropriated at the Bateman Ditch point of diversion in exchange for the entitlements inuring in Choteau's appropriations that would otherwise require that is [szc-its] water rights be left in the Teton to flow directly down to its point of diversion at the Burd Ditch. Choteau has no cause for complaint regardless of how its entitlements are made available as is [s/c-its] headgate through the Burd Ditch. CCC's Conditional Withdrawal of Claim for Alternate Point ofDiversion, Case 410-131, p. 2 (emphasis added).2 CCC had a total of four rights consolidated into Case 410-131. The claims are: Flow Rate Ditch or Headgate Claim Priority Date 41O 187182-00 July 4, 1876 41O 187183-00 March 15, 1954 410 187184-00 February 27, 1905 4.0 cfs McDermott Ditch 410 187186-00 December 31, 1890 4.0 cfs McDermott Ditch 7.5 cfs 22.5 cfs Burd Ditch Burd Ditch This Court takes judicial notice of pleadings filed in Case 410-131. 4 CCC's characterization of Bateman Ditch usage as an exchange plan for the benefit of upstream users, rather than as a point of diversion for a water right, was consistent with the position ultimately taken by Saylor and Eldorado in this Case. Whether such a plan exists and should be recognized by the Water Court became a primary issue in this Case and is the subject of this Order. Notwithstanding CCC's characterization of Bateman Ditch usage as an exchange plan, Objectors to CCC's rights in Case 410-131 wanted CCC's claim to be decreed with a point of diversion at the Bateman Ditch. They opposed having those rights delivered to the Burd Ditch via the natural channel of the Teton River where carriage losses were significantly higher. They asserted use of the natural channel of the Teton to deliver CCC rights would obligate them to curtail or discontinue diversion of their own rights to supply water to CCC. To prevent this change from occurring, three objectors, including Saylor and Eldorado, filed motions in case 410-131 to compel CCC to receive its water from the Bateman Ditch. The Water Master rejected these arguments, and CCC's water rights were decreed with a single point of diversion in the Burd Ditch. Master's Report, Case 410-131, p. 3. As a consequence of CCC's withdrawal of its claimed point of diversion in the Bateman Ditch, this Case, rather than Case 410-131, became the vehicle for review of the substitution or exchange plan described by CCC and claimed by Eldorado and Saylor. Patrick Saylor has three water rights in the Bateman Ditch. Although Saylor's water rights were adjudicated in case 410-128, he moved to intervene in this Case "to ensure that his interests in his water rights and an arrangement to the use of his ditch located in the Teton River Basin (410), are protected." Saylor's Motion to Intervene and Brief in Support, pp. 1-2. Saylor referred to the use of the Bateman Ditch to supply downstream seniors as a "water conservation method" and an "Exchange Agreement." Motion to Intervene and Brief in Support, p. 2. Pre-Hearing Orders filed by the parties in this case placed the viability of their claim for a substitution or exchange plan using the Bateman Ditch squarely before the Court. In its Pre-Hearing Order's issues of fact, Eldorado posed the following question: "Whether water commissioners have utilized the Bateman Ditch to deliver decreed water rights prior to July 1, 1973 and the decreed rights diverted and delivered via the Bateman Ditch." Pre-Hearing Order, #20, p. 16. Eldorado also asked: "Whether the use of the Bateman Ditch by water commissioners prior to July 1, 1973 to deliver downstream decreed rights should be adjudicated by the Water Court and, if so, as part of Eldorado's claims or otherwise?" Pre-Hearing Order, #10, p. 17. In his Pre-Hearing Order, Saylor asserted he and his predecessors-in-interest worked with water commissioners to divert water down the Bateman Ditch and then out of the Bateman Ditch back to the Teton River upstream of the Burd Ditch. Pre-Hearing Order, # 4, p. 2. Lower Teton Joint Objectors (LTJO) opposed Saylor's and Eldorado's claims to a cognizable interest in a water substitution or exchange plan. In their Pre-Hearing Order, LTJO asserted the Bateman Ditch was not used by Eldorado Cooperative Canal Company to deliver water to its shareholders and that Eldorado was not a party to an exchange agreement using the ditch. Pre-Hearing Order, #2, p. 2. Teton Cooperative Reservoir Company (TCRC) joined in the arguments presented by LTJO. It also argued that Saylor could not assert an interest in an exchange or substitution plan because his water rights claims did not describe such a plan. The Water Master issued an Order adopting all four proposed Pre-Hearing Orders. At trial, the Master noted: "Use of the Bateman ditch is kind of centralized into this case for better or worse." Tr., June 20, 2012, 1:09:00-1:09:05. After trial, Eldorado withdrew the Bateman Ditch as a point of diversion for its water rights, and the Water Master issued a Master's Report on the Bateman Ditch. The Master's Report received multiple objections. Saylor and Eldorado objected to Findings of Fact 6 and 8 and Conclusion of Law 8. LTJO objected to Conclusion of Law 5. STANDARD OF REVIEW The Rules of Civil Procedure require this Court to accept a Master's Findings of Fact unless clearly erroneous. M. R. Civ. P. 53(e)(2). 6 The Montana Supreme Court follows a three-part test to determine if a trial court's findings of fact are clearly erroneous. See Interstate Production Credit Assn. v. DeSaye, 250 Mont. 320, 323, 820 P.2d 1285, 1287 (1991). The Water Court uses a similar test for reviewing objections to a Master's Findings of Fact. Rule ll(c), W.R.Adj.R., referencing M. R. Civ. P. 53(e). First, this Court reviews the record to see if the findings are supported by substantial evidence. Second, if the findings are supported by substantial evidence, this Court then determines whether the Master has misapprehended the effect of the evidence. Third, if substantial evidence exists and the effect of the evidence has not been misapprehended, this Court may still determine that a finding is clearly erroneous when, although there is evidence to support it, a review of the record leaves the Court with the definite and firm conviction that a mistake has been committed. DeSaye, 250 Mont, at 323, 820 P.2d at 1287. This Court reviews a Master's Conclusions of Law to determine whether they are correct. Geil v. Missoula Irr. Dist., 2002 MT 269, 1 22, 312 Mont. 320, 59 P.3d 398; Steer, Inc. v. Dept. ofRevenue, 245 Mont. 470, 474-75, 803 P.2d 601, 603 (1990). DISCUSSION I. The Savior and Eldorado Objection to Finding of Fact 6. Finding of Fact 6 is provided below. Saylor and Eldorado contend the italicized portions are clearly erroneous. When the water commissioner used the Bateman Ditch for the CCC senior water right, sufficient water was diverted into the ditch to assure 300.00 miner's inches of water were available five miles away at the Burd Ditch headgate. This required a significant amount of carriage water for ditch loss. According to long time commissioner Bud Olson this carriage water simply came from the river. He did not cut back the amount of water delivered to any other water users, such as Eldorado, to account for this ditch loss. If any of this carriage water was left in the Bateman Ditch after CCC's 300 miner's inches were turned back into the river, it was used by Patrick Saylor. (Testimony of Bud Olson) However, it was not Saylor's decreed water right. By the time the Bateman Ditch was used for the CCC water right, Saylor was out of priority and had been cut off by the commissioner. Saylor's use of this water was considered compensation for the use of his ditch. (Testimony of Patrick Saylor) There is no evidence indicating Eldorado, Saylor, or any other water right owner used a portion of their own water right to compensate for the carriage water needed to deliver the CCC right through the Bateman Ditch. Master's Report, Finding of Fact 6, p. 6 (emphasis added). Saylor objects to the Master's finding that no other water rights, including Saylor's decreed rights, were delivered through the Bateman Ditch, "[b]y the time Bateman Ditch was used for the CCC water right." This finding is significant because it implies that Saylor is not entitled to carry his rights in the Bateman Ditch when it is being used for delivery of the senior CCC right. The record shows that the Bateman Ditch simultaneously carried both the senior CCC right and at least portions of the Saylor rights. Saylor testified: "We just make sure that we satisfy Choteau Cattle Company's water right and then whatever was left, uh, I'd get to use that water. Sometimes there was water left over, sometimes there wasn't." Saylor Testimony, June 18, 2012, 2:32:28-2:32:42. The record also shows that Water Commissioner Leonard Blixrud did not intentionally divert more than 1,500 miner's inches into the Bateman Ditch. Blixrud Testimony, June 21, 2012, 4:06:30-4:06:41 and Saylor Testimony, June 21, 2012, 3:44:00-3:44:22. This testimony indicates that water delivered to supply CCC's senior right via the Bateman ditch was being subtracted from Saylor's rights, rather than being added to them. There was conflicting testimony regarding how much water had to be diverted into the Bateman ditch to supply CCC with its 300 inches at the Burd headgate. Water Commissioner Blixrud testified he would collect 400 inches in the Bateman Ditch to get 300 inches at the Burd Ditch. Blixrud Testimony, June 21, 2012, 3:54:10-3:54:28. Commissioner Bud Olson testified he sometimes needed 800 inches at the Bateman headgate to get 300 inches at the Burd headgate. Saylor Ex. 5, Olson Depo., p. 31,1. 3-5. The record indicates occasions when the amount of water diverted into the Bateman Ditch exceeded the amount of water necessary to satisfy the 300 inch CCC rights, as well as occasions when Saylor received no water, or less water, than his full 1,500 inch entitlement. Saylor Exhibits 8 and 9. Saylor also testified he paid assessments to the water Commissioner when flows in the Bateman Ditch exceeded 300 inches. Saylor Testimony, June 18, 2012, 2:42:00-2:42:35. This testimony meant Saylor was not obligated to pay the Water Commissioner for carriage of CCC water in the Bateman Ditch. This testimony also indicated there were times when the Bateman ditch was used to convey both the CCC rights and a portion of Saylor's decreed rights. On these occasions, Saylor paid for whatever water was carried in the Bateman Ditch above the amount delivered to CCC. Water Commissioner Leonard Blixrud testified that Saylor let other parties deliver their water through his ditch (Bateman) in exchange for which Saylor received some water. Blixrud Testimony, June 21, 2012, 3:56:16-3:57:15. According to Blixrud, Saylor got about 200 inches of water when CCC needed water and Saylor was otherwise out of priority. Blixrud Testimony, June 21, 2012, 4:09:21-4:10:02. Saylor's testimony that he only paid for water in the Bateman Ditch in excess of the 300 inches delivered to CCC, and Blixrud's testimony that Saylor was able to use a portion of the water in the Bateman Ditch in exchange for allowing the Bateman Ditch to be used for delivery of CCC's senior right, cannot be harmonized with the Water Master's conclusion that the Bateman Ditch was only used to deliver the CCC right when "... Saylor was out of priority and had been cut off by the commissioner." Master's Report, Finding of Fact 6, p. 6. Saylor would have no incentive to allow the CCC right to be carried through his Ditch unless he received some benefit from such an arrangement. The benefit Saylor received was bypassing the losing reach of the Teton River, which gave him the ability to use his own water rights in exchange for allowing the CCC right through his ditch. Upstream water users also benefited from use of the Bateman Ditch to convey the senior CCC right because the alternative, delivering that right through the losing reach of the Teton River's natural channel, would have required them to reduce or terminate their diversions. There was no substantial evidence to support the Master's finding that Saylor's right was cut off whenever CCC's right was being transported in the Bateman Ditch, and the Master's finding on this point is therefore in error. There was evidence that Saylor reduced his own rights to compensate for carriage of CCC's right in the Bateman Ditch. This evidence took the form of testimony from Saylor and Blixrud that only 1,500 inches were normally diverted into the Bateman, and Saylor's testimony that his payments to the water commissioner were reduced when CCC's right was diverted through the Bateman. No payment reduction would have been needed if the entirety of both the Saylor and CCC rights were carried in the Ditch simultaneously. The Master's Finding that no one reduced their rights to accommodate carriage of CCC's right in the Bateman is also in error. The testimony indicates Saylor received less than the full amount of his water rights when necessary to satisfy CCC's senior claim. II. The Savior and Eldorado Objection to Finding of Fact 8. Saylor and Eldorado objected to Finding of Fact 8. The portion to which they objected reads as follows: "Saylor's priority dates are somewhat junior in relation to other rights decreed in Perry v. Beattie. As a result, his water rights are typically cut off before the commissioner turns CCC water into the Bateman Ditch." Master's Report, Finding of Fact 8, p. 7. This Finding is similar to Finding of Fact 6 in which the Master concluded that Saylor's rights had been cut off by the Water Commissioner by the time the Bateman Ditch was used as a carrier for CCC water. This Court has carefully reviewed the record and has not found evidence or testimony suggesting that Saylor's rights to use of water terminated when commissioners began using the Bateman Ditch as a carrier for CCC rights. On the contrary, the Water Commissioner's records, testimony from Water Commissioners, and testimony from Patrick Saylor all indicate that both Saylor and CCC water rights were often, although not always, diverted into the Bateman Ditch at the same time. Both Saylor and CCC received a benefit from this practice. Saylor had no incentive to allow CCC to use his Ditch if his own water rights were cut off in the process. The point of allowing CCC to use his Ditch was to free up water that would otherwise be lost in the Teton's natural channel. This savings enabled Saylor to divert his rights when he would not otherwise be able to do so. 10 The Master's findings in Findings of Fact 6 and 8 that Saylor's water rights were cut off when the Bateman Ditch was used to transport CCC rights is not based on substantial evidence and is therefore in error. HI. The Savior and Eldorado Objection to Conclusion of Law 8. Conclusion of Law 8 provides: "This report addresses the issues raised by certification case WC-2012-07." Certification Case WC-2012-07 stems from a District Court action entitled Giese et al. v. Blixrud, Cause No. DV-11-009 (Mont. Ninth Jud. Dist). The issue certified from the District Court to the Water Court is as follows: Pursuant to Montana Code Annotated 85-2-406(2)(b), the Ninth Judicial District Court certifies to the Chief Water Judge to make a determination of all existing rights to divert water to the ditch commonly known as the "Bateman Ditch," which as a point of diversion on the south side of the Teton River, in the SENESW of Section 36, Township 25 North, Range 6 West, Teton County, Montana. Upon completion of this determination, the Court requests that the Chief Water Judge return the decision to the District Court with a tabulation or list of the existing rights to use this Ditch and their relative priorities. ... Certification Order, p. 1-2. Saylor and Eldorado object to Conclusion of Law 8 because it does not provide a list of water rights diverted through the Bateman Ditch as requested by the District Judge in Giese et al. v. Blixrud. The Water Master's conclusion that the Master's Report addresses the issues raised by certification is not technically a statement of the law. Regardless, it has been the intention of parties and of the Water Court to resolve cases involving water rights transported by the Bateman Ditch, so as to respond to the District Court's request for a tabulation of those rights. The Water Master and the parties acknowledged this Case would be the vehicle by which historic use of the Bateman Ditch as a carrier of other water rights would be either recognized or rejected. It is therefore appropriate for the Water Court to supply the tabulation requested by the District Court in certification Case WC-2012-07. LTJO argues the only rights that can now be diverted through the Bateman Ditch are those claimed by Patrick Saylor. Saylor and Eldorado argue that Saylor's rights and 11 rights belonging to CCC, Lew Clark, and Glen Willow Ranch can be diverted through the Bateman Ditch. LTJO contends that while use of the Bateman Ditch for delivery of CCC's senior right may have been an historic practice, such use cannot continue because CCC no longer claims a point of diversion for the Bateman Ditch. To the extent that practice may have occurred historically as a mechanism to maximize the water available for other Perry v. Beattie decreed users in the upper Teton, the use of CCC's water rights as the basis for that practice has been eliminated by CCC's voluntary withdrawal [of a point of diversion for Bateman Ditch] and the Water Court's acceptance of the withdrawal. LTJO's Objections to Master's Report, p. 3. LTJO contends that under Montana law, CCC's water rights must have a point of diversion for the Bateman Ditch. Without such a point of diversion, LTJO contends that CCC's rights cannot be carried in the Bateman Ditch and must instead be delivered via the losing reach of the Teton River to the Burd head gate. The practice of using a ditch or pipeline to bypass a losing reach in a natural stream channel is a type of water use that can rise to the level of a protectable interest. Similarly, the substitution of one source of water for another, the use of storage water as a substitute for direct diversions from a surface supply, and the substitution of one method of delivery for another are also water usage practices recognized in statutes and common law. The Montana Supreme Court recognizes the practice of substituting one source of water for another. In a case arising in Gallatin County, water users on Middle Creek diverted excess water from the upper reaches of that source. To mitigate impacts from these excess diversions on senior users downstream, an alternate supply of water was dropped into Middle Creek via a ditch from the Gallatin River. Middle Creek Ditch Company v. Henry, 15 Mont. 558, 39 P. 1054 (1895). See also, In Re Petition for Organization and Establishment of an Irrigation District in Ravalli County, 209 Mont. 218, 680 P.2d 944 (1984) (involving a similar exchange of Bitterroot River water for 12 water from Skalkaho Creek). Montana statutes recognize exchange agreements whereby storage water can be used as a substitute for water diverted directly from a stream. Section 85-2-413, MCA. The Montana Water Court has also recognized substitutions and exchanges in Cases 411-542, 411-619, and 411-623. In addition to Montana, other states recognize water conservation practices and exchange plans and grant them the status of a protectable interest. As an example, the Colorado Supreme Court has articulated a four-part test applicable to such practices: [A]n exchange administers is a water management practice between decreed points of the diversion. State When Engineer a junior appropriator makes a sufficient substitute supply of water available to a senior appropriator, the junior may divert at its previously decreed point of diversion water that is otherwise bound for the senior's decreed point of diversion. Four critical elements of the exchange are that: (1) the source of substitute supply must be above the calling water right; (2) the substitute supply must be equivalent in amount and of suitable quality to the downstream senior appropriator; (3) there must be available natural flow at the point of upstream diversion; and (4) the rights of [downstream senior water users] cannot be injured when implementing the exchange. Empire Lodge Homeowners Ass'n. v. Moyer, 39 P.3d 1139, 1155, 2001 Colo. LEXIS 1061, *45-*46 (internal citations omitted). Exchanges or substitutions have also been recognized in Utah, where water may be diverted by a subsequent appropriator from a stream, and that water from the same stream or, or from another stream, if equal in quantity and quality, may be returned into the stream or into the ditch of the prior appropriator if that is done at a point where the prior appropriator can make full use of the water, and without injury or damage to him. Caldwell, 64 Utah at 497-98, 231 P. at 437 (emphasis added). Use of alternative carriers to avoid losing stream reaches is also a recognized practice. Wiggins v. Muscupiabe Land & Water Co., 113 Cal. 182, 45 P. 160 (Cal. 1896) (involved bypass of a losing reach using a dam and ditch); Basinger v. Taylor, 36 Idaho 591, 211 P. 1085 (Idaho 1922) (involved the use of a pipeline to bypass a losing reach); and Fuller v. Sharp, 33 Utah 431, 94 P. 813 (Utah 1908) (involved approval of diversions above a losing reach). 13 Commentators on this subject have endorsed recognition of arrangements that bypass losing stream reaches. "By building a ditch on less permeable soils to carry water around such reaches, or even constructing pipelines for this purpose, water can be delivered to downstream users that otherwise would not be available in the stream channel." Lawrence J. MacDonnell, Out of Priority Water Use: Adding Flexibility to the Water Appropriation System, 83 Neb. L. Rev. 485, 521 (2004). Commentators have also recognized there is no entitlement to demand delivery of water via a natural channel in the absence of injury to a downstream senior. "The exclusive right of the prior appropriator to have the natural flow to the extent of his appropriation does not, however, enable him to insist upon receiving it in the natural channel; the upper appropriator may instead give it to him by returning it into his ditch above his place of use-not necessarily into the stream above the head of his ditch if he gets the quantity to which he is entitled, thereby substantially permitting the substitution of an artificial flow if it can be done without damage. ..." 1 Weil, Water Rights in the Western States (3rd Ed.) § 279, p. 292, quoted in U.S. v. Caldwell, 64 Utah 490, 498, 231 P. 434, 437 (1924). Recognition of exchange plans, conservation measures, and other innovations to maximize beneficial use of a limited resource is consistent with Montana's stated policy regarding water use. It is the policy of this state and the purpose of this chapter to encourage the wise use of the state's water resources by making them available for appropriation consistent with this chapter and to provide for the wise utilization, development, and conservation of the waters of the state for the maximum benefit of its people with the least possible degradation of the natural aquatic ecosystems. Section 85-2-101(3), MCA. The general welfare of the people of Montana, in view of the state's population growth and expanding economy, requires that water resources of the state be put to optimum beneficial use and not wasted. Section 85-1-101(1), MCA. 14 LTJO's assertion that the Bateman Ditch cannot be used to carry CCC water rights because CCC withdrew its point of diversion in that ditch is inconsistent with Montana's policy regarding efficient use of water resources. LTJO asks that other water users who have historically been able to use their rights discontinue that use so that water can be diverted into a losing reach of the Teton River. LTJO asserts that this practice is not wasteful because such diversions recharge the aquifer beneath the river and ultimately make more water available to senior users downstream. As discussed in part IV below, LTJO is entitled to its day in court regarding potential injury to its members associated with use of the Bateman Ditch as a carrier for the CCC senior right. Concerns about potential injury however, relate to the implementation of Say lor's substitution plan, and do not preclude recognition of such a plan. Recognition of a substitution plan is appropriate where, as here, its existence is substantiated by 60 years of unopposed historic use. Using the threat of injury associated with exercise of a substitution plan to categorically preclude recognition of such a plan could not only have potentially negative consequences for the Teton, but would also disrupt historic water use practices in other places where water substitution or exchange plans have historically been implemented. LTJO's argument that a substitution plan cannot be recognized because CCC withdrew its point of diversion in the Bateman Ditch also raises fundamental issues regarding the purpose of this adjudication. The Montana Supreme Court has repeatedly said that a primary objective of the adjudication is to define water rights according to historic beneficial use. "[T]he Water Use Act contemplates that all water rights, regardless of prior statements or claims, as to amount, must nevertheless, to be recognized, pass the test of historical, unabandoned beneficial use." McDonald v. State, 220 Mont. 519, 529, 722 P.2d 598, 604 (1986). "... beneficial use shall be the basis, the measure and the limit of all rights to the use of water." McDonald, 220 Mont, at 530, 722 P.2d at 605 (emphasis in original). See also Hohenlohe v. State, 2010 MT 203, f 43, 357 15 Mont. 438, 240 P.3d 628 appropriator has a right to that amount of water historically put to beneficial use. Applying the historic beneficial use standard to recognition of substitution plans is consistent with the practice of the Water Court in adjudicating water rights claims. It is also consistent with the Montana Constitution which provides that "[a]ll existing rights to the use of any water for any useful or beneficial purpose are hereby recognized and confirmed." Mont. Const., Art. IX, Section 3. Existing rights are defined as "a right to the use of water as it would be protected under the law as it existed prior to July 1, 1973." Section 85-2-102(12), MCA. None of these judicial, constitutional, or legislative directives contain a qualifier that existing rights can be recognized only if they fit within the confines of a claim form as argued by LTJO. Water law has evolved, and must continue to evolve, to solve problems and to recognize historic patterns of water usage. There will always be cases such as this one where rights to use of water do not fit cleanly within a formula prescribed by the Legislature. This does not mean that such rights are forfeit. It means only that the Legislature and the Courts cannot foresee and describe with perfect accuracy all the variations of a right to use water. The question therefore is whether this Court should recognize a historic use of water and confirm a right in that use. The practice of using the Bateman Ditch in lieu of the natural channel of the Teton is not an exchange of one source of water for another, but it is typical of historic arrangements made throughout Montana and elsewhere in the western states to obtain maximum benefit from a limited resource. Such arrangements deserve recognition because they are consistent with Montana's stated goal of conserving water resources. The record shows that use of the Bateman Ditch to carry CCC's rights occurred for many years both before and after July 1, 1973. Until now, that practice has not been opposed by other water users. Accordingly, this Court recognizes Patrick Saylor's right to use the Bateman Ditch in lieu of the natural channel of the Teton River to deliver water to CCC's head gate at the Burd Ditch. Saylor acknowledged that both the CCC right and carriage losses associated with delivery of that right through the Bateman Ditch are 16 subtracted from his own rights. Thus, the total flows that can be diverted through the Bateman Ditch are limited to 1,500 miner's inches, which is the total of Saylor's rights. This figure is supported by testimony from Saylor himself and former water commissioners who indicated it was their intention to limit flows diverted into the Bateman Ditch to 1,500 inches. Saylor Testimony, June 21, 2012, 3:44:00-3:44:22 and Blixrud Testimony, June 21, 2012, 4:06:30-4:06:41. Saylor does not have a right to use the Bateman Ditch for transportation of rights belonging to Lew Clark and Glen Willow Ranch. Testimony from Patrick Saylor indicates that use of the Bateman Ditch as a conduit for rights belonging to Lew Clark and Glen Willow Ranch occurred only infrequently and did not begin until about 1975. Saylor testified that the Lew Clark rights were only run through the Bateman Ditch "a time or two" or "once in a great while." Saylor Testimony, June 18, 2012, 2:35:08- 2:35:10 and June 21, 2012, 3:32:18-3:32:22. Likewise, Saylor testified that Glen Willow Ranch rights were only run through the Bateman Ditch for a couple of years when he was leasing the Glen Willow Ranch. Saylor Testimony, June 18, 2012, 2:35:29-2:35:52. Accordingly, the Water Court does not recognize a right to divert the Lew Clark or Glen Willow Ranch rights into the Bateman Ditch. LTJO claims its members are injured by delivery of CCC rights through the Bateman Ditch. Determination of this issue presents a question of water administration to be decided by the District Court and is discussed in Section IV below. IV. LTJO Objection to Conclusion of Law 5. LTJO's objection is limited to the last sentence of conclusion of Law 5. Conclusion of Law 5 states: Eldorado and Saylor also suggest the Findings of Fact and Conclusions of Law that presumably will be part of a final decree for Basin 410 should state that the use of the Bateman Ditch as a conservation measure may be allowed by the District Court as a historical practice when it enforces the Water Court decree. ... It will be for the District Court to decide that it has the authority to employ this practice, and if it is appropriate to employ the practice, given the factual situation presented at that time. " 17 Master's Report, #5, p. 12 (internal citation omitted and emphasis added). LTJO makes the following argument regarding the last sentence of Conclusion of Law 5: This statement is incorrect as a matter of law because it defers to the District Court the decision whether authority exists to employ the practice of allowing diversions of water to the Bateman Ditch based upon historic practice. This statement implies that the District Court can authorize a diversion of water from a natural stream to an artificial Ditch. This authority rests solely in the province of the Water Court. Accordingly, the Master's Report should be modified prior to adoption to delete this statement to be absolutely clear that the Water Court has adjudicated no right to divert water based on any historical practice not specifically set forth in an existing water right. LTJO's Objections to Master's Report, p. 2. LTJO contends it would be a violation of the Water Use Act for the District Court to authorize a diversion of water into the Bateman Ditch unless such a right has been specifically decreed by the Water Court. LTJO Objections to Master's Report, pp. 7-8. Although LTJO asserts that only the Water Court has exclusive jurisdiction to authorize diversions into the Bateman Ditch, it argues the Water Court cannot do so because the practice of using the Bateman Ditch cannot be precisely described within the confines of a water right claim form. LTJO's position is that even though the Water Court could decree such a right, all rights to use the Bateman as a carrier ceased when CCC withdrew its point of diversion for the Bateman Ditch on its water rights claim. The boundary between responsibilities of the Water Court and the District Court in this Case is not as clear as might be desirable. As Chief Water Judge Loble commented in his Order adopting the Master's decision consenting to CCC's withdrawal of its point of diversion in the Bateman Ditch: "issues sometimes arise that fall into or overlap the jurisdictional seam between the two courts. The two courts then need to coordinate their efforts to resolve the issues." Case 410-131, Choteau Cattle Company- Bateman Ditch Decision, p. 12 (Nov. 5, 2010). Whether LTJO's jurisdictional argument is correct depends on how narrowly or broadly the jurisdiction of the Water Court is defined and where the boundary between the Water Court's authority to define rights and the District Court's authority to 18 administer them is drawn. The Water Court's exclusive jurisdiction over "all matters relating to the determination of existing water rights within the boundaries of the state of Montana" is well established in both statute and case law. Section 3-7-224(2), MCA; § 85-2-216, MCA; Mildenberger v. Galbraith, 249 Mont. 161, 815 P.2d 130 (1991); Baker Ditch Co. v. District Court, 251 Mont. 251, 824 P.2d 260 (1992). Once water rights are determined by the Water Court, they are distributed by district courts. "The district courts shall supervise the distribution of water among all appropriators." Section 85-2406(1), MCA. Because substitution and exchange plans involve definable and protectable interests to the use of water, recognition of such interests falls within the exclusive jurisdiction of the Water Court. Once defined by the Water Court, such interests should be administered by the District Courts. LTJO's objection to Conclusion of Law 5 is correct too insofar as it asserts that authority to define and recognize a substitution or exchange plan lies with the Water Court. LTJO contends that implementation of Saylor's substitution plan involving the Bateman Ditch will cause its members injury. Whether injury occurs will depend on variables such as water availability and use of water by junior and senior users along the Teton and its tributaries. Determination of injury arising from Saylor's substitution of the Bateman Ditch for the natural channel of the Teton is similar to questions of injury arising in futile call cases. See Irion v. Hyde, 110 Mont. 570, 584-85, 105 P.2d 666, 674 (1940); and Raymond v. Wimsette, 12 Mont. 551, 560-61, 31 P. 537, 540-41 (1892). The presence or absence of injury in futile call cases arises from the administration and use of water rights, not from the recognition and definition of those rights. Accordingly, determination of injury associated with implementation of Saylor's substitution plan lies within the jurisdiction of the District Court. LTJO also contends substitution of the Bateman ditch for the natural channel of the Teton results in a change in stream conditions. LTJO asserts that because water users junior to CCC are entitled to stream conditions in existence when those juniors 19 appropriated their rights, the Bateman Ditch cannot be used to deliver CCC rights. Again however, this argument presents questions of injury like those in futile call cases and should be decided by the District Court. CONCLUSION Say lor and Eldorado objected that Findings of Fact 6 and 8 were partially in error. This Court was unable to find substantial evidence supporting the Master's finding that Saylor's water rights were cut off when CCC rights were being diverted through the Bateman Ditch. On the contrary, the record contains substantial evidence showing simultaneous diversion of both CCC and Saylor rights in the Bateman Ditch. That portion of the Master's Report concluding otherwise was error. Although the Master's Report was intended to resolve issues raised in the Ninth Judicial District Court's certification of the Bateman Ditch issues to the Water Court, it did not set forth a listing of water rights diverted into the Bateman Ditch, or establish relative priorities for those rights. Accordingly, it is ORDERED that the following rights may be diverted into the Bateman Ditch in the priority listed below: Flow Rate Priority Owner Claim Priority Date 1 CCC 410 187182-00 July 4, 1876 2 Patrick Saylor 41O32857-00 August 31, 1884 3 Patrick Saylor 410 32860-00 December 31, 1884 7.5 cfs 4 Patrick Saylor 41O32858-00 December 31, 1889 10.0 cfs 7.5 cfs 20.0 cfs In keeping with historic practice, the combined flow of all four rights may not exceed 1,500 miner's inches. The flow rate and carriage loss associated with transportation of the CCC senior right in the Bateman Ditch (410 187182-00) must be subtracted from the 1,500 inches otherwise available to Saylor under his water rights. Thus, by way of example only, if CCC is receiving its 300 inches through the Bateman Ditch and losses attributable to carriage of that right are 100 inches, then the amount of water available to Saylor is 1,100 inches. 20 Although this ORDER provides Saylor with the option of delivering CCC claim 410 187182-00 through the Bateman ditch, he is not obliged to do so. Nothing herein shall constitute a change to any element of CCC claim 410 187182-00 as decreed by the Water Court in Case 410-131. Regardless of whether the Bateman Ditch or the natural channel of the Teton River is used to deliver CCC claim 410 187182-00, its point of diversion shall remain at the Burd Ditch, and its 300 miners inch flow rate (7.5 cfs) shall be measured at the Burd Ditch headgate as it has been historically. The Water Court takes no position regarding the potential adverse effect of diversion of the CCC water right in the Bateman Ditch on downstream appropriators. Resolution of that issue falls within the jurisdiction of the District Court. ORDER IT IS ORDERED that the Master's Report is AMENDED as noted above, and IT IS FURTHER ORDERED that the Master's Report is ADOPTED as amended. DATED this £~ day of June, 2013. Russ McElyea tJ Associate Water Judge 21 CERTIFICATE OF SERVICE I, Carol A. Bertke, Deputy Clerk of Court of the Montana Water Court, hereby certify that a true and correct copy of the above ORDER AMENDING MASTER'S REPORT AND ADOPTING AS AMENDED was duly served upon the persons listed below by depositing the same, postage prepaid, in the United States mail. Stephen R. Brown Elena J. Zlatnik Garlington, Lohn & Robinson, PLLP PO Box 7909 Missoula MT 59807-7909 (406)523-2500 srbrown@garlington.com ejzlatnik@garlington.com Michael J. L. Cusick Moore, O'Connell & Refling, P.C. PO Box 1288 Bozeman, MT 59771-1288 (406)587-5511 morlaw@qwestoffice.net Holly Jo Franz Attorney-at-Law POBox 1155 Helena, MT 59624-1155 (406) 442-0005 hollyjo@franzdriscoll.com John E. Bloomquist Rachel A. Kinkie Doney, Crowley, Payne, Bloomquist P.C. P.O. Box 1185 Helena, MT 59624-1185 (406)443-2211 j bloomquist@doneylaw. com rkinkie@doneylaw.com DATED this V day of QiUMli ,2013. (J Carol A. Bertke Deputy Clerk of Court S:\Sharc\WC-BASINFOLDERS\41O\41OCascsUlO-129\OAA_4IO-l29_053013d0CX 22
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