Montana interim committee hears update on exempt-well lawsuit as homeowners describe lost water rights

A staff attorney for the Department of Natural Resources and Conservation told the Water Policy Interim Committee on Jan. 13 that a November lawsuit in the First Judicial District challenges Montana's exempt-well law and seeks to bar the state's current exemption process.

The staff attorney said the complaint (quoted in the transcript as filing under "section 80 five-two-three 0 6 subsection 3A3i") asserts four constitutional claims: that the exemption impairs the prior-appropriation doctrine and senior water rights, violates equal protection, infringes substantive and procedural due process, and denies the public's right to notice and participation. Plaintiffs have asked the court to enjoin the law and require DNRC to administer groundwater under prior-appropriation priorities; defendants have until Jan. 23 to answer, the attorney told the committee.

Why it matters: public commenters said the agency's application of the court ruling and the department's subsequent reviews have left newly developed subdivisions and recent homebuyers without legally recognized water rights. Jennifer Miller, a resident of Red Fox Meadows in East Helena, told the committee that letters denying groundwater certificates arrived after she bought her home and that many homeowners now can't sell because wells are not tied to a valid water right. "We have a mess made by a lack of enforcement of their own rules," she said, asking for a legislative remedy for families left with unsaleable homes.

Developers and other property owners described similar harms. Daniella Bowen of Grand Vista Estates said her family paid to buy and build a home only to receive a DNRC denial of a groundwater certificate; Mary Heinemann and Scott Maher described subdivisions where lots are now effectively "dry." Attorney Peter Scott told the committee he believes that lots created through lawful county subdivision approvals before the 2024 Broadwater County decision have vested property interests and urged DNRC to issue 602 forms where owners possess a vested right.

Agency and process context: DNRC staff and the committee repeatedly said the agency is constrained while litigation is active and that many of the substantive problems stem from a long-running mismatch between county subdivision approval, DEQ/DNRC pre-determinations, and the timing of water-right filings. Anna Pakenham Stevenson, DNRC's Water Rights Division administrator, noted that House Bill 681 (agency coordination) was designed to move the water-right analysis to the front end of the planning process to avoid exactly this issue going forward, but that many developments are now caught in the middle of prior procedures.

What the committee heard about short-term relief: speakers urged the committee to explore administrative remedies or prompt legislative fixes, including limited grandfathering for lots with vested development approvals, streamlined 602 processing for long-existing wells, or creation of an emergency mitigation fund for impacted homeowners. Several members suggested exploring a committee-sponsored bill so the Legislature could act in the next session; staff noted the committee can draft bills in the interim and pre-introduce them before the session.

What happens next: DNRC told the committee it will continue to track litigation and to work with stakeholders on legislative and administrative options; the lawsuit will proceed through District Court where timing is uncertain and DNRC noted its ability to answer many questions is limited while litigation is pending.

The committee did not take any formal votes. It directed staff and agency partners to keep the committee informed and to explore legislative language and administrative options that address subdivisions and property owners caught in the transition between prior practice and the court ruling.