Bostwick Props., Inc. v. Montana Dept. of Natural Res. and Conservation

Bostwick Props., Inc. v. Montana Dept. of Natural Res. and Conservation, 2013 WL 696352 (Mont. 2013) (holding the Montana Department of Natural Resources and Conservation had the authority to deny a developer a water permit; runoff from impermeable surfaces could not be used in calculating net depletion of surface water; developer’s burden to prove lack of adverse effect was not shifted because of an uncertain hydrological connection or a senior rights holder’s ability to bring administrative action; de minimus use did not establish developer’s lack of adverse effect; developer proved lack of adverse effect for its proposed irrigation season only mitigation plan; and developer was not prejudiced by the bias of the Montana Department of Natural Resources and Conservation).

Bostwick Properties (“Bostwick”) filed an application with the Montana Department of Natural Resources and Conservation (“DNRC”) for a water use permit for municipal use in a subdivision in Gallatin County, Montana.   When DNRC failed to take immediate action, Bostwick sought a writ of mandate to require DNRC to issue the permit or hold a hearing on the matter.  DNRC then denied Bostwick’s water use permit saying it failed to demonstrate no net depletion of surface water, and failed to prove legal availability and lack of adverse impact.  The District Court for Gallatin County (“district court”) granted Bostwick’s writ of mandate request, which DNRC appealed to the Supreme Court of Montana (”Court”).  The Court reversed the district court’s decision and remanded the case to DNRC to hold a hearing on Bostwick’s permit application because Bostwick had not proved lack of adverse effect and DNRC had no legal duty to grant Bostwick’s permit.  After the hearing, DNRC again denied the permit, determining Bostwick’s water use would cause a net depletion of surface water; it failed to demonstrate lack of adverse effect; and its mitigation proposal was inadequate.  Bostwick sought review by the district court, which agreed DNRC failed to show no net depletion or lack of adverse effect, but found Bostwick’s proposed mitigation adequate.  Both Bostwick and DNRC appealed this decision to the Court.

The Court ruled on five issues on appeal.  First it determined whether DNRC had the authority to deny Bostwick’s permit.  Bostwick argued Montana law required DNRC to grant the permit because Bostwick settled all objections.  The Court held that not only must Bostwick resolve all objections, but it must also prove legal availability and lack of adverse effect by a preponderance of the evidence, and DNRC had the authority to deny Bostwick’s permit if it did not do so.

The second issue was whether DNRC and the district court’s requirement Bostwick mitigate its water usage was proper.  Bostwick argues four theories to support the proposition that it would not cause net depletion of surface water or adversely affect senior rights.

First Bostwick asserts paved roads and parking lots in its proposed development prevent water from being used by native plants or evaporating, which can then be collected and used to recharge the Gallatin River.  Bostwick argues DNRC should consider this runoff when calculating if a net depletion exists.  The Court said Montana law did not require DNRC to consider any sources of water other than those sources in the proposed permit; to consider other sources would be contrary to legislative intent; and doing so would cause an absurd result if Bostwick could factor that water into their calculation even though it had not right to use it.

Next, Bostwick argues because there is no way to determine when its proposed extraction of groundwater would cause the Gallatin River to lose water, the DNRC could show no net depletion or adverse effect.  Bostwick asserts DNRC must grant the permit if it cannot prove there is net depletion.  The Court said this attempt to shift the burden of proof to DNRC was impermissible and Bostwick failed to carry its burden to show lack of any adverse effect.

Bostwick then argues the amount of water it applied for is de minimus and would not adversely affect senior rights.  The Court said it was Bostwick’s burden to demonstrate a lack of adverse effect and it failed to do so.

Finally, Bostwick asserts senior rights holders could force Bostwick to stop using water through the administration of priorities, yet again attempting to shift the burden.   The Court once again said that the law was clear; it was Bostwick’s burden to show it would not jeopardize senior rights, and it failed to make that showing.

The third issue was whether the district court’s determination that Bostwick’s mitigation proposal was adequate was proper.  Bostwick’s proposal mitigated it water usage but only during the irrigation season.  The district court noted Bostwick’s non-irrigation season usage could only potentially adversely affect one party, FWP, who said Bostwick did not adversely affect them.  The Court held that while generally settling with objectors was not enough, because there was only one affected party who would not suffer adverse effects, Bostwick met its burden of showing its mitigation plan was adequate.

The fourth issue was whether DNRC could require Bostwick to specifically identify a water right it would use for mitigation.  Bostwick argued providing DNRC with other details including the amount and location of water, timing, and seniority rights was sufficient.  The Court agreed with DNRC that the identification of the specific water right was necessary to fully evaluate the mitigation plan.

The final issue was whether DNRC was biased and therefore prejudiced Bostwick.  Bostwick argued DNRC’s bias during the permit application procedure violated its right to due process.  The Court remanded the case to DNRC after the first denial of Bostwick’s application, despite Bostwick’s request a neutral party hold the hearing.  The district court held there was no prejudice because it independently came to the same conclusions as DNRC.  The Court found this reasoning to be persuasive and held Bostwick failed to show substantial prejudice.

The Court affirmed the judgment of the district court on all counts.