2005 Montana Legislature

HOUSE BILL NO. 22

INTRODUCED BY MCNUTT

BY REQUEST OF THE ENVIRONMENTAL QUALITY COUNCIL

AN ACT PROVIDING THE FINDINGS AND PURPOSE OF IMPLEMENTING A WATER ADJUDICATION FEE; PROVIDING BENCHMARKS AND ACTION, INCLUDING ELIMINATION OF THE FEE, THAT MUST BE TAKEN IF BENCHMARKS ARE NOT MET BY THE DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION; ALLOWING THE REEXAMINATION, PRIOR TO THE ISSUANCE OF A FINAL DECREE, OF CLAIMS IN BASINS THAT WERE VERIFIED; DEFINING "OWNER" FOR PURPOSES OF THE WATER ADJUDICATION FEE; ESTABLISHING WATER ADJUDICATION FEES; PROVIDING THAT THE FEE DOES NOT APPLY TO FEDERAL WATER RIGHTS AND INDIAN RESERVED AND ABORIGINAL CLAIMS TO WATER; PROVIDING THAT THE DEPARTMENT OF REVENUE COLLECT THE FEE ON BEHALF OF THE DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION; REQUIRING THE DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION TO ASSIGN ANY UNPAID FEES TO THE DEPARTMENT OF REVENUE FOR COLLECTION; PROVIDING THAT A LIEN MAY BE PLACED ON A WATER RIGHT IF THE FEE IS NOT PAID AFTER COLLECTION EFFORTS; ESTABLISHING A WATER ADJUDICATION ACCOUNT; ESTABLISHING THE AMOUNT OF REVENUE ALLOCATED EACH YEAR FROM THE ACCOUNT; PROVIDING THAT THE FEE MAY NOT BE ASSESSED ONCE $31 MILLION HAS BEEN DEPOSITED IN THE ADJUDICATION ACCOUNT; REQUIRING THE DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION AND THE WATER COURT TO REPORT TO THE ENVIRONMENTAL QUALITY COUNCIL AND THE APPLICABLE LEGISLATIVE APPROPRIATION SUBCOMMITTEES; PROVIDING THE PROCESS FOR EXAMINATION OF CLAIMS IN VERIFIED BASINS PRIOR TO THE ISSUANCE OF A FINAL DECREE; PROVIDING RULEMAKING AUTHORITY; AMENDING SECTIONS 15-1-216, 85-2-231, AND 85-2-237, MCA; AN PROVIDING AN EFFECTIVE DATE AND A TERMINATION DATE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

Section 1. Findings -- purpose. (1) The purpose of [sections 1 through 10] is to generate revenue to adequately fund Montana's water adjudication program to:

(a) complete claims examination and the initial decree phase;

(b) reexamine claims in basins that were verified and were not subject to the supreme court examination rules when the water court has received a petition and issued an order pursuant to [section 9] or the water court has issued an order on its own initiative; and

(2) With adequate funding, it is realistic and feasible for the department to complete claims examination and reexamination of verified basins for which the water court has received a petition and issued an order pursuant to [section 9] or the water court has issued an order on its own initiative by June 30, 2015. It is also realistic and feasible for the water court to issue a preliminary or temporary preliminary decree by June 30, 2020, for all basins in Montana.

(3) It is essential to preserve the trust that the water users of Montana have placed in the legislature by ensuring that the revenue generated by the water adjudication fee established in [section 5] is used only for the purpose of adjudicating Montana's water rights.

Section 2. Benchmarks -- action taken if not met. (1) The completion of initial claims examination is of a higher priority than reexamination of claims that were subject to the verification process unless the chief water judge issues an order making reexamination a higher priority, as provided in subsection (3)(b).

(2) There are approximately 57,000 water right claims that were filed pursuant to 85-2-212 that must be examined. There are approximately 98,000 claims that were verified that may be reexamined using the supreme court examination rules if the water court receives a petition and issues an order as provided in [section 9] or the water court issues an order on its own initiative.

(3) (a) The water court shall prioritize basins for the purpose of claims examination and reexamination by the department.

(b) The chief water judge has the authority to order that reexamination be completed for a certain basin in a higher priority than claims examination. If the chief water judge issues an order requiring the department to reexamine claims rather than examining claims, the number of claims that were reexamined must be counted against the amount of claims that the department is required to examine for that period.

(4) (a) The cumulative benchmarks that are provided in subsection (4)(b) must be met. If the benchmarks are not met, the fee contained in [section 5] that is attached to a water right for the purpose of funding the adjudication may not be assessed the following even-numbered year. All claims must be examined by June 30, 2015.

(b) The cumulative benchmarks are as follows:

Date 60; & #160; 0; Total Number of

& #160; Claims Examined

December 31, 2006 0; 8,000 0;

December 31, 2008 0; 19,000 60;

December 31, 2010 0; 31,000 60;

December 31, 2012 0; 44,000 60;

June 30, 2015 0; &# 160; 57,000

Section 3. Definitions. For the purposes of [sections 1 through 10], the following definitions apply:

(1) "Calculated volume" means the feasible volume given the flow rate and period of use.

(2) "Person" means an individual, corporation, partnership, association, firm, or other legal entity.

(3) "Water right" means a legal right to the beneficial use of water as recorded in the centralized water recording system by a water court decree, provisional permit, ground water certificate, filed exempt right, Powder River declaration, statement of claim, stockwater permit, temporary provisional permit, or 1962 to 1973 ground water filings as recorded with the department or that portion of a water reservation that has been put to beneficial use. This definition applies only to the use of the term for the purposes of assessing the fee and [sections 1 through 10].

Section 4. Owner. (1) For the purposes of giving notice or imposing a fee, as provided for in [section 5], "owner", as used in [sections 5 and 6] and this section, means the first enumerated entity on a water right.

(2) The owner is responsible for collecting the proportionate share of any fee from the other entities enumerated on the water right.

Section 5. Water adjudication fees -- exceptions. (1) (a) Except as provided in subsection (1)(c), a water adjudication fee is authorized and directed to be imposed by the department of revenue on all water rights.

(b) Except as provided in [section 2], [section 7], and subsections (1)(c) and (10) of this section, an owner shall pay a biennial fee for the purpose of funding Montana's water adjudication based on the fees established in subsections (4) through (7) of this section.

(c) The water adjudication fee may not be imposed on federal water rights and tribal reserved and aboriginal claims to water.

(2) The water adjudication fee is due on January 31 of even-numbered years. The penalty and interest provisions contained in 15-1-216 apply to late payments of the fee.

(3) (a) Subject to subsection (3)(b), the department of revenue may withhold revenue equal to the actual cost of collecting the water adjudication fee.

(b) The department of revenue may not withhold more than 5% of the revenue generated.

(4) (a) An owner for the purposes described in subsections (4)(b) through (4)(f) shall pay according to a graduated scale. The number of water rights for which a fee must be paid on a per purpose basis is capped at 20 water rights a person for each graduated level.

(b) For a commercial water right with a claimed or calculated volume that is:

(i) 0 acre feet to 100 acre feet, the fee is $20;

(ii) greater than 100 acre feet and less than or equal to 5,000 acre feet, the fee is $1,000; and

(iii) greater than 5,000 acre feet, the fee is $2,000.

(i) 0 acre feet to 1,000 acre feet, the fee is $20;

(ii) greater than 1,000 acre feet and less than or equal to 4,000 acre feet, the fee is $1,000; and

(iii) greater than 4,000 acre feet, the fee is $2,000.

(d) For a mining water right with a claimed or calculated volume that is:

(i) 0 acre feet to 1,000 acre feet, the fee is $20;

(ii) greater than 1,000 acre feet and less than or equal to 4,000 acre feet, the fee is $1,000; and

(iii) greater than 4,000 acre feet, the fee is $2,000.

(e) For a municipal water right with a claimed or calculated volume that is:

(i) 0 acre feet to 1,000 acre feet, the fee is $20;

(ii) greater than 1,000 acre feet and less than or equal to 4,000 acre feet, the fee is $1,000; and

(iii) greater than 4,000 acre feet, the fee is $2,000.

(f) For a power generation water right, both consumptive and nonconsumptive, with a claimed or calculated volume that is:

(i) 0 acre feet to 100,000 acre feet, the fee is $20;

(ii) greater than 100,000 acre feet and less than or equal to 1 million acre feet, the fee is $1,000; and

(iii) greater than 1 million acre feet, the fee is $2,000.

(5) Except for instream flow water rights used for irrigation purposes or for the purposes identified in subsection (4), an instream flow water right or an instream flow water reservation, with a claimed or calculated volume that is:

(a) 0 acre feet to 50,000 acre feet, the fee is $20;

(b) greater than 50,000 acre feet and less than or equal to 1 million acre feet, the fee is $1,000; and

(6) The fee for an irrigation water right or irrigation claim that is part of an irrigation district, ditch company, canal company, irrigation project, water user's association, or other organized group with the purpose of allocating irrigation water is $20 a user, with the fee capped at 40 users. The fee must be paid by the user. If an irrigation district, ditch company, or water user's association has more than 40 users, the fee may not exceed $800 and must be split equally among the users.

(7) The fee for all water rights that are not subject to subsections (4) through (6) is $20. The fee is capped at 20 water rights a person for purposes that are not addressed in subsections (4) through (6).

(8) The fees established in subsections (4) through (7) apply to all water rights on record with the department that are not withdrawn or terminated.

(9) A person may file an administrative appeal with the department to contest the total amount of the fee assessed against the person or a fee imposed based on incorrect ownership records.

(10) Fees authorized in this section may not be assessed after June 30, 2014.

Section 6. Debt collection. If the owner of a water right does not pay the fee after receiving an initial bill statement and one reminder bill statement:

(1) the department shall turn over the debt to the department of revenue for collection pursuant to Title 17, chapter 4; and

(2) if efforts to collect the debt are not successful, the department of revenue may file a lien against the water right in the county where the water is put to beneficial use after notifying each entity enumerated on the water right.

Section 7. Water adjudication account. (1) There is a water adjudication account within the state special revenue fund created in 17-2-102.

(2) (a) For the period beginning July 1, 2005, and ending June 30, 2015, there is allocated to the department and the water court up to $2.6 million, plus the approved inflation factor contained in the revenue estimating resolution, each fiscal year from the water adjudication account for the sole purpose of funding the water adjudication program. These funds may not be used for the purpose of updating or maintaining a computer database.

(b) For the period beginning July 1, 2015, and ending June 30, 2020, there is allocated to the department and the water court up to $1 million, plus the approved inflation factor contained in the revenue estimating resolution, each fiscal year from the account for the sole purpose of funding the water adjudication program.

(3) (a) Subject to subsection (3)(b), the total amount of revenue deposited in the water adjudication account from the fee provided for in [section 5] may not exceed $31 million.

(b) If federal funds are appropriated for the purposes of [sections 1 through 10], the maximum amount that may be deposited in the account must be reduced by the amount of federal funds appropriated.

(c) Once revenue generated from the fees provided for in [section 5] and any federal revenue appropriations have reached $31 million, the fee may no longer be assessed.

(4) Interest and income earnings on the water adjudication account must be deposited in the account.

(5) Revenue remaining in the water adjudication account on June 30, 2020, must be transferred to the water right appropriation account provided for in 85-2-318.

Section 8. Reporting requirements. The department and the water court shall:

(1) provide reports to the environmental quality council at each meeting during a legislative interim on:

(a) the progress of the adjudication; and

(b) the total revenue generated by the fees established in [section 5] and deposited in the account provided for in [section 7];

(2) include a status report on the adjudication in their presentation to the applicable appropriation subcommittees during each legislative session; and

(3) provide a budget that outlines how each of the entities will be funded in the next biennium, including general fund money, state special revenue funds, and the allocated fee revenue.

Section 9. Examination of claims in verified basins. (1) At any time prior to the issuance of a final decree, in basins that were evaluated using the verification process rather than the examination process, the owners of water rights in the basin or a specified area in the basin may petition the water court to examine claims in the basin or an area in the basin pursuant to the supreme court rules.

(2) The owners of at least 15% of the number of water rights affected by the proposed reexamination shall sign the petition.

(3) At a minimum, the petition must provide:

(a) the specific water right purpose or water right purposes to be examined; and

(b) the elements to be examined.

(4) (a) The water judge shall evaluate each petition and determine if reexamination is necessary to provide greater accuracy to the adjudication.

(b) The water judge may request public comment on the petition.

(5) If the water judge determines reexamination should be conducted, the water judge shall issue an order that provides:

(a) what water right purpose or water right purposes must be examined by the department;

(b) the elements to be examined;

(d) the timeframe in which the reexamination must be completed.

(6) The water court may issue an order requiring reexamination on its own initiative. The order must provide the information contained in subsection (5).

(7) Upon receipt of the reexamination information from the department, the water court shall notify the users in the basin or the specified area in the basin identified in the petition of the final results of the reexamination and shall notify them regarding further steps or actions being taken as a result of the reexamination.

(8) Any actions taken as a result of the reexamination must be conducted in accordance with this part.

Section 10. Rulemaking authority. The department may adopt rules for the purpose of implementing [sections 1 through 10].

Section 11. Section 15-1-216, MCA, is amended to read:

"15-1-216. Uniform penalty and interest assessments for violation of tax provisions -- applicability -- exceptions. (1) (a) A person who fails to file a required tax return or other report with the department by the due date, including any extension of time, of the return or report must be assessed a late filing penalty of $50 or the amount of the tax due, whichever is less.

(b) A person who purposely fails to file a required return, statement, or other report must be assessed an additional late filing penalty of $200 or the amount of the tax due, whichever is less.

(c) A person who fails to pay a tax when due must be assessed a late payment penalty of 1.5% a month or fraction of a month on the unpaid tax. The penalty may not exceed 18% of the tax due.

(d) A person who purposely fails to pay a tax when due must be assessed an additional penalty equal to 25% of the tax due or $200, whichever is less, plus interest as provided in subsection (2).

(2) Interest on taxes not paid when due must be assessed at the rate of 12% a year, accrued at 1% a month or fraction of a month, on the unpaid tax. Interest on delinquent taxes and on deficiency assessments is computed from the original due date of the return until the tax is paid.

(3) (a) Except as provided in subsection (3)(b), this section applies to taxes, fees, and other assessments imposed under Titles 15 and 16 and [section 5].

(b) This section does not apply to:

(i) property taxes;

(ii) gasoline and vehicle fuel taxes collected by the department of transportation pursuant to Title 15, chapter 70; or

(iii) taxes, fees, and other assessments subject to other penalty or interest charges as provided by law."

Section 12. Section 85-2-231, MCA, is amended to read:

"85-2-231. Temporary preliminary and preliminary decree. (1) A water judge may issue a temporary preliminary decree prior to the issuance of a preliminary decree if the temporary preliminary decree is necessary for the orderly adjudication or administration of water rights.

(2) (a) The water judge shall issue a preliminary decree. The preliminary decree must be based on:

(i) the statements of claim before the water judge;

(ii) the data submitted by the department;

(iii) the contents of compacts approved by the Montana legislature and the tribe or federal agency or, lacking an approved compact, the filings for federal and Indian reserved rights; and

(iv) any additional data obtained by the water judge.

(b) The preliminary decree must be issued within 90 days after the close of the special filing period set out in 85-2-702(3) or as soon after the close of that period as is reasonably feasible.

(c) The water judge may issue an interlocutory decree if an interlocutory decree is otherwise necessary for the orderly administration of water rights.

(3) A temporary preliminary decree may be issued for any hydrologically interrelated portion of a water division, including but not limited to a basin, subbasin, drainage, subdrainage, stream, or single source of supply of water, or any claim or group of claims at a time different from the issuance of other temporary preliminary decrees.

(4) The temporary preliminary decree or preliminary decree must contain the information and make the determinations, findings, and conclusions required for the final decree under 85-2-234.

(5) If the water judge is satisfied that the report of the water master meets the requirements for the preliminary decree and is satisfied with the conclusions contained in the report, the water judge shall adopt the report as the preliminary decree. If the water judge is not satisfied, the water judge may recommit the report to the master with instructions or modify the report and issue the preliminary decree.

(6) The department shall examine claims in basins that were verified rather than examined as ordered by the water court. The objection and hearing provisions of Title 85, chapter 2, part 2, apply to these claims."

Section 13. Section 85-2-237, MCA, is amended to read:

"85-2-237. Reopening and review of decrees. (1) After July 1, 1996, the water judges shall by order reopen and review, within the limits set forth by the procedures described in this section, all preliminary or final decrees:

(a) that have been issued but have not been noticed throughout the water divisions; or

(b) for basins for which claims have been filed under 85-2-221(3).; or

(c) for basins that were verified and not examined for which the water court has received a petition and has determined that examination is necessary as provided in [section 9] or the water court has issued an order for reexamination on its own initiative.

(2) (a) Each order must state that the water judge will reopen the decree or decrees and, upon a hearing, review the water court's determination of any claim in the decree or decrees if an objection to the claim has been filed for the purpose of protecting rights to the use of water from sources:

(i) within the basin for which the decree was entered; or

(ii) in other basins that are hydrologically connected to sources within the basin for which the decree was entered.

(b) A person may not raise an objection to a matter in a reopened decree if the person was a party to the matter when the matter was previously litigated and resolved as the result of the previous objection process, unless the objection is allowed for any of the following reasons:

(i) mistake, inadvertence, surprise, or excusable neglect;

(ii) newly discovered evidence that by due diligence could not have been discovered in time to move for a new trial under Rule 59(b), Montana Rules of Civil Procedure;

(iii) fraud, misrepresentation, or other misconduct of an adverse party;

(iv) the judgment is void;

(v) any other reason justifying relief from the operation of the judgment.

(3) The water judges shall serve notice by mail of the entry of the order providing for the reopening and review of a decree or decrees to the department and to the persons entitled to receive service of notice under 85-2-232(1).

(4) Notice of the reopening and review of a preliminary or final decree must also be published at least once each week for 3 consecutive weeks in at least three newspapers of general circulation that cover the water division or divisions in which the decreed basin is located.

(5) No An objection may not cause a reopening and review of a claim unless the objection is filed with the appropriate water court within 180 days after the issuance of the order under subsection (1). This period of time may, for good cause shown, be extended by the water judge for up to two 90-day periods if an application for extension is made within the original 180-day period or any extension of it.

(6) The water judge shall provide notice to the claimant of any timely objection to the claim and, after further reasonable notice to the claimant, the objector or objectors, and other interested persons, set the matter for hearing. The water judge may conduct individual or consolidated hearings, and any hearing must be conducted according to the Montana Rules of Civil Procedure. On an order of the water judge, a hearing may be conducted by a water master, who shall prepare a report of the hearing as provided in Rule 53(e), Montana Rules of Civil Procedure.

(7) The water judge shall, on the basis of any hearing held on the matter, take action as warranted from the evidence, including dismissal of the objection or modification of the portion of the decree describing the contested claim.

(8) An order or decree modifying a previously issued final decree as a result of procedures described in this section may be appealed in the same manner as provided for an appeal taken from a final order of a district court.

(9) An order or decree modifying a previously issued preliminary decree as a result of procedures described in this section may be appealed under 85-2-235 when the preliminary decree has been made a final decree.

(10) An order requiring the department to examine a basin that was initially verified is limited to the types of claims in the basin that were identified in the petition as provided in [section 9] or the types of claims identified in an order that the water court issued on its own initiative."

Section 14. Codification instruction. [Sections 1 through 10] are intended to be codified as an integral part of Title 85, chapter 2, part 2, and the provisions of Title 85, chapter 2, part 2, apply to [sections 1 through 10].

Section 15. Contingent voidness. If at least $2 million is not appropriated in a line item for each fiscal year from state sources other than the water adjudication account provided for in [section 7], for the purposes of funding Montana's water adjudication program, then [this act] is void.

Section 16. Notification to tribal governments. The secretary of state shall send a copy of [this act] to each tribal government located on the seven Montana reservations and to the Little Shell band of Chippewa.

Section 17. Effective date. [This act] is effective July 1, 2005.

Section 18. Termination. [This act] terminates June 30, 2020.

- END -

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