Crow Tribe Water Compact

This case represents the second appeal from the Crow Water Compact, an

agreement to distribute and manage water rights among the United States, the Crow Tribe

and the State of Montana(“Settling Parties”). The Crow Tribe, the United States through

the Department of the Interior, and the Montana Reserved Water Rights Compact

Commission agreed to the terms of the Compact in 1999, and the Montana Legislature

ratified it the same year. The Compact is codified at § 85-20-901, MCA. The Crow

Tribe ratified the Compact by vote of its members in 2011. We recently discussed the

facts pertaining to the establishment and history of the Crow Water Compact in a

previous appeal, and they will not be repeated here. In re Crow Water Compact, 2015

MT 217, 380 Mont. 168, 354 P.3d 1217(“Crow I”).

¶8 This appeal arises from the concerns of individual Objectors to the Water

Compact. The Objectors in this case are not parties to the Compact, nor do they own

land or water rights on the Crow Reservation. Rather, Objectors own land and water

rights near the reservation and assert that the Crow Compact will adversely affect their

interests.

¶9 In 2012, the Water Court entered a preliminary decree containing the terms of the

Compact. After sending notice to over 16,000 persons and entities, the Water Court

received approximately 100 objections. FifteenObjectorsremain.

¶10 Pursuant to § 85-2-702(3), MCA,the Compact must be published upon ratification and “must be included in the preliminary decree as provided by 85-2-231, and unless

an objection to the Compact is sustained under 85-2-233, the terms of the Compact

must be included in the final decree without alteration.” The Water Court approved the

Crow Water Compactin a final decree on May 27, 2015.

¶11 The purpose of the Compact was to establish the water rights of the Crow Tribe

relative to the rights of the state of Montana and the United States. Crow I, ¶ 17-18.

These water rights are quantified using the Practicably Irrigable Acreage standard (PIA).

SeeState ex rel. Greely v. Confederated Salish & Kootenai Tribes, 219 Mont. 76, 92, 712

P.2d 754, 764 (1985); In re General Adjudication of All Rights to Use Water in the Gila

River System and Source,201 Ariz. 307,316-17,35 P.3d 68, 77-78(Ariz. 2001). During

the Compact negotiations, the Settling Parties differed on the extent of PIA (and thus the

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amount of water) the Tribe was entitled to under Winters v. United States, 207 U.S. 564,

577-78, 28 S. Ct. 207 (1908). The Settling Parties sought to protect their respective

interests without obtainingan expensive and time-consuming survey or years of complex

litigation.

¶12 The Tribal Water Rights are articulated by basin in Article III of the Compact.

First, it was established that the Tribe has a 500,000 acre feet per year (AFY) natural flow

right from the Big Horn River Basin. Additionally, the United States conditionally

granted the Tribe another 300,000 AFY, divided into two 150,000 AFY components,

from its water right in Bighorn Lake. Second, the Compact states that the Tribe has “all

surface flow, groundwater and storage” rights in the other basins covered by the

Compact. Finally, the Tribe is also required to reserve 250,000 AFY of the Tribal Water

Right between the Yellowtail Afterbay Dam and the Two Leggins diversion facility for

the benefit of the fisheries and other recreational purposes.

¶13 The Objectors raise the following issues on appeal: First, the Objectors contend

that the Water Court did not apply the proper legal standard regarding their obligation to

prove injury from the application of the Compact. Second, the Objectors raise several

issues concerning the extent of their injury from the operation of the Compact. Third, the

Objectors claim that their due process rights were violated during the Compact

negotiation process. We have restated the issues for clarity and brevity and collapse all

the objections concerning water rights in the Compactunder Issue Two. We do not reach

whether the Objectors are entitled to attorneys’ fees under the Private Attorney General

Doctrinebecause the appeal affirms the Water Court’s order.

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STANDARD OF REVIEW ¶14 This Court applies the same standards of review to decisions of the Water Court as

it does to decisions of a district court. Mont. Trout Unlimited v. Beaverhead Water Co.,

2011 MT 151, ¶ 16, 361 Mont. 77, 255 P.2d 179. This Court reviews the Water Court’s

findings of fact under the clearly erroneous standard. Weinheimer Ranch v. Pospisil,

2013 MT 87, ¶ 19, 369 Mont 419, 299 P.3d 327. This Court reviews the Water Court’s

conclusions of law de novo to determine whether they are correct. Skelton Ranch v.

Pondera Co. Canal & Res. Co., 2014 MT167,¶26, 375 Mont. 327, 328 P.3d 644.

DISCUSSION ¶15 Issue One: Did the Water Court apply the proper legal standard of review in approving the Compactin the final order?

¶16 The Objectors maintain that the Water Court committed reversible error in holding

that the Objectors must show “material injury” before the Court could rule the decree

unreasonable. The Objectors argue that they only need to show “good cause” or that the

Compact is not “fundamentally fair, adequate and reasonable and conform[ing] to the

law.” Officers for Justice v. Civil Serv. Comm., 688 F.2d 615, 625 (9th Cir. 1982).

¶17 The Objectorsconfusethe standard for filing the initialobjection with the standard

for ultimately declaring the Compact to be unreasonable. Pursuant to § 85-2-233(1),

MCA, Objectors need only show “good cause” to trigger the requirement for the Water

Court to hold a hearing on the objection to the Compact. Additionally, under

§85-2-233(4), MCA,“[o]bjections . . . must specify the paragraphs and pages containing

the findings and conclusions to which objection is made. The request must state the

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specific grounds and evidence on which the objections are based.” However, “good

cause” is not the standard the Water Court should apply in determining the ultimate

reasonableness of the Compactitself.

¶18 In Crow Iwe noted the correct standard in reviewing objections to compacts:

[T]he court’s intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned. Officers for Justice, 688 F.2d at625. Furthermore, the Water Court has in previouscases

adopted complementary standards in addition to Officers for Justice in reviewing water

compacts. In the Matter of the Adjudication of the Existing and Reserved Rights to the

use of Water both Surface and Underground, of the Chippewa Cree Tribe of the Rocky

Boy’s Reservation withinthe State of Montana, WC-2000-01, Mem. Op., 2002 ML 4232,

at 6 (Mont. Water Ct., June 12, 2002) (hereinafter Chippewa Cree); In the Matter of the

Adjudication of the Existing and Reserved Rights to the use of Water both Surface and

Underground, of the Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation

within the State of Montana in Basins 40E, 40EJ, 40O, 40Q, 40R & 40S, WC-1992-01,

Mem. Op. at 7 (Mont. Water Ct. August 10, 2001) (hereinafter Fort Peck). In cases in

which the objector was a non-party to a compact, the Water Court first assesses whether

“the decree was the product of good faith, arms-length negotiations,” and if so, the

“negotiated decree is presumptively valid and the objecting party has a heavy burden of

demonstrating that the decree is unreasonable.” United States v. Oregon, 913 F.2d 576,

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581 (9th Cir. 1990) (internal citations and quotations omitted). Thus, if the court finds

that “the decree was the product of good faith, arms-length negotiations,” the burden of

proof on the objector changes and it must show that the decree is unreasonable. Oregon,

913 F.2d at 581. The Water Court has in previous water compact cases articulated that

the “heavy burden” the objector must show is that its interests are “materially injured by

operation of the Compact.” Chippewa Cree at 6; Fort Peck at 7. In this case, the Water

Court applied the analysis as articulated above; we conclude that there is no error in law

in the Water Court’s application of this standard.

¶19 Issue Two: Did the Objectors meet their burden of proof under the standard of review applied to compacts?

¶20 The Objectors do not challenge that the Compact was negotiated at arm’s length

and in good faith. Therefore, the Compact is presumptively valid and the Objectors are

obliged to show that the Compact is unreasonable and that their interests are materially

injured.

¶21 The Objectors raise the following issues concerning the language of the Compact

and the allocation of water rights: First, that the Compact failed to conform to applicable

law as established by Winters and its progeny. Second, that the Compact violates the

Objectors’ property rights by giving all the water in the smaller drainages to the Tribe

and authorizing the Tribe to enter any land for diversion purposes. Third,the Compact is

unreasonable because it (i) over-appropriated/failed to quantify water to the Tribe, (ii) the

State negotiated the Compactcontrary to the public interest, and (iii) the closure of basins

injures the Objectors. None of these arguments obviates the need for the Objectors to

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demonstrate that the Compact materially injures their interests. Officers for Justice, 688

F.2d at625;Oregon, 913 F.2d at581;Chippewa Cree at 6; Fort Peckat 7.

¶22 “The objective of the Compact, which is a negotiated settlement, is to define the

Tribe’s Winters rights, eliminate litigation risk and expense, and achieve finality for the

Tribe and other parties to the agreement.” Crow I, ¶ 38. If the courts were to reexamine

every issue in consent decrees and settlements with the minutia that the Objectorsrequest

in relation to the Tribe’s Wintersrights, it would defeat the purpose of compacts.

¶23 It is important to note that under the terms of the Compact itself, no user of the

Tribal Water Right as defined therein can assert senior priority against any state-law

water user with a pre-1999 right, the year that the Compact was ratified and adopted by

the Montana Legislature. See § 85-20-901, MCA, Art. III, Sec. A.6.a; see also Art. III,

Secs. B.6.a, C.6.a, E.6.a, F.6.a. The Tribal Water Right cannot be exercised ahead of

pre-1999 state-law rights. Thus the amount of water available to pre-1999 state law

rights isprotected and certainly not materially injured by the Compact.

¶24 The approach the Compact applies to quantification and allocation of water rights

does not render the Compact unreasonable. The Objectors invite the Court to reconsider

the allocation of water as a departure from controlling law. Specifically, they desire the

Court to make a determination regarding the Tribe’s water rights under Winters. At trial,

the Objectors introduced expert testimony that the Tribe had been allocated more water

than it was entitled to under its Winters rights. Objectors’ expert testimony suggested

that the Tribe was over-allocated water based on (1) 300,000 AFY storage right in Big

Horn Lake, (2) that the Tribal Water Right should be discounted because of the land

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status within the reservation, and (3) return flow from Tribal diversions should count

against the total AFY the Tribe received.

¶25 We cannot conclude that the Water Court was clearly erroneous in adopting the

compromise reached by the Settling Parties. The storage right in Big Horn Lake was a

grant from the Federal Government subject to limitations in the Streamflow and Lake

Level Management Plan. Section 85-20-901, MCA, Art III, Sec. A.6.a.7. The Objectors

do not show how this grant from the federal government is beyond the legal authority of

the U.S. The status of land within the reservation is uncertain and the Objectors’

hydrological expert admitted as much at trial. Thus, it is difficult to support that

objection with anything other than speculation. And, substantial evidence exists to

demonstrate that return flow from Tribal diversions does not reduce the amount of water

available downstream.1 The potential of the Tribe not using all the water it was allocated

is also speculative and not indicia of over-allocation, especially if the Objectors have

sufficient water for their own diversions. As the court articulated in Officers for Justice,

it is not appropriate for the Court “to reach any ultimate conclusions on the contested

issues of fact and law which underlie the merits of the dispute, for it is the very

uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation

that induce consensual settlements.” Officers for Justice, 688 F.2d at 625.

1 See Reserved Water Rights Compact Commission, Staff Report, 22 (2010).

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¶26 Additionally, the Objectors challenge the legality of the allocation of water on the

Ceded Strip.2 They claim that the 47,000 AFY allocated to the Tribe was an arbitrary

number that was allocated for an improper purpose and that in times of shortage it may

affect the water rights of some of the Objectors.

¶27 However, under Winters and its progeny the tribe has a right to water for

development of industrial interests. Winters, 207 U.S. at 564. 28 S. Ct. at 207; Greely,

219 Mont. at 93, 712 P.2d at 765. The Tribe’s interests in the Ceded Strip are primarily

mineral deposits (coal) that may be developed for industrial purposes. The allocation of

water in the Ceded Strip reflects the opportunity to do that for the Tribe. As with the

other Compact provisions, the Tribal allocation of water on the Ceded Strip was a result

of arms-length negotiations between the Settling Parties,andthe Tribal water rights in the

Ceded Strip are limited by the Compact.

¶28 The Compact provides for the protection of state water rights and limitations of

the amount of water that may be diverted from either the Bighorn River Basin or the

Yellowstone River drainages. See § 85-20-901, MCA, Art. III, Secs. F.6, F.1.a.(1).

Given these protections in the Compact and the calculation of the water right based on

the development of mineral deposits we cannot conclude that the Water Court was clearly

erroneous in adopting the Compactallocation of water for the Ceded Strip.

¶29 The Compact does not compromise state-based water rights. The Objectors argue

that the Compact extinguishes the state-based water rights in all the drainages other than

2 For a description of the Ceded Strip, see Department of Revenue v. Bird, 252 Mont. 438, 440, 829 P.2d 941, 942 (1992).

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the Big Horn and Yellowstone. The Objectors cite Article III Sections B, C, D, and E of

the Compact, which state that “the Tribe has a water right for all surface water, ground

water and storage within” those basins. However, the Compact also states in the same

sections that water rights recognized under state law with priority dates before June 1999

are protected from assertions “of senior priority in the exercise of current uses of the

Tribal Water Right.” The Compact also clarifies that any new development of the Tribal

Water Right shall be junior to state-based water right holders. Effectively, any new

development from June 1999 will be junior to the Objectors’ rights. See § 85-20-901,

MCA, Art.III,Secs.B.6, C.6, D.6,E.6.

¶30 The Objectors misunderstand how the Compact allocated water rights to the Tribe

relative to state-based rights in these basins. Although the Compact grants all the water

in these basins to the Tribe, it is subject to a significant caveat designed to protect

existing state-based rights. The Compactalso grants a degree of protection to state-based

rights that are junior to the Tribal water rights. Section 85-20-901, MCA, Art. III, Secs.

B.6, C.6, D.6, E.6. Therefore, under the plain language of the Compact, state-based

rights are not nullified; in fact,they are given a degree of protection that would otherwise

not be available absent the Compact. It is not unreasonable to quantify the Tribe’s rights

in these basins by the entirety of the water available if state-based rights are not affected.

The Objectors have failed to meet their burden to prove the Compact materially injures

them with respect to the integrity of state rights under the Compact.

¶31 The lack of tribal institutions for the administration of water rights does not

constitute material injury to the Objectors. The Objectors raise arguments regarding the

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distribution and administration of the water rights in times of shortage. The Objectors

reference the lack of Tribal administration in situations in which shortage of water may

require judicial involvement. The Objectors contend that the nonexistence of these

administrative institutions materially injures their interests. However, as we held in the

previous Crow Compact appeal, the Water Court’s review of the Compact is limited to

Article III. Section 85-20-901, MCA, Art. VII, Sec. B; Crow I, ¶ 8. Thus, our review of

the Water Court’s assessment is limited as well. Still, the Objectors are mistaken in their

argument that the Compact removes enforcement of state-based rights from state

agencies and courts. Article IV of the Compact plainly states that the Tribal water right

is administered by the Tribe (or the Bureau of Indian Affairs in the absence of

appropriate Tribal institutions). Section 85-20-901, MCA, Art. IV, Sec. A.2.a.

Conversely, “the Tribe shall not administer any water right recognized under state law.”

Section 85-20-901, MCA, Art. IV, Sec. A.2.c (emphasis added). The Compact protects

state-based rights. Section 85-20-901, MCA, Art. III, Secs. B.6, C.6, D.6, E.6. The

Compact may not authorize the Tribe to take water from the Objectors. And in times of

shortage,the Objectors may enforce their rights under state law with state agencies and in

state court. Section 85-20-901, MCA, Art. IV, Sec. A.2.c. The Compact explicitly

offsets the potential for injury to state-based water right holders. Consequently, the

Objectors have failed to meet their burden to prove the Compact materially injures them

with respect to the administrative provisions in the Compact.

¶32 The Compact does not permit the unconditional entry of the Tribe onto private

land. The Objectors argue that the Compact injures their interest because it includes

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language that allows the Tribe to “divert or permit the diversion of the Tribal water right

from any place and by any means for use in connection with the Tribal interests.”

Section 85-20-901, MCA, Art. III, Secs. A.4, B.4, C.4, D.4, E.4, F.4. They argue that

this language will permit the Tribe to enter the private land of the Objectors and divert

water from it for the Tribe’s benefit.

¶33 However, a diversion is a change in use of water. Section 85-2-402, MCA. Thus,

under Article IV of the Compact, which establishes the proper judicial channels for

changes in use, the Tribe may not enter private fee land without the owners’ permission

or the appropriate legal authority otherwise acquired from a state agency or court.

Furthermore, the Compact expressly prohibits an interpretation of the text that would

“impair, amend, or alter rights under existing state or federal law.” Section 85-20-901,

MCA, Art. V, Sec. B.11. The Objectors have rights existing under state law and the

Tribe may not invoke the Compact to grant them authority to impair, amend, or alter the

rights existing under state law. In fact, these principles are clearly reflected in the

Compact Commission Staff Report which says, “the tribe can divert water from any

point...where it owns land or has the permission of the landowner to divert.” Reserved

Water Rights Compact Commission, 83, 94, 96, 97, 100, 103 (emphasis added). The

Objectors have failed to meet their burden to prove the Compact materially injures them

with respect to entering private land.

¶34 The closure of several basins does not compromise Objectors’ rights. Objectors

submit that they have suffered injury due to the closure of the basins. The Objectors

argue that the Compact would freeze these basins in time, effectively disallowing

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“progress based on technology, improved practices, changes in irrigation and livestock

methods and methodology.” The Objectors speculate that the Tribe would object to

change in use of a state water right since the Tribe was granted all the unappropriated

waters in these basins.

¶35 However, the Water Court correctly explained that the Objectors do not have a

property interest in future appropriations or changes in use. Seven Up Pete Ventures v.

State, 2005 MT 146, ¶ 26, 327 Mont. 306, 114 P.3d 1009. Furthermore, the Compact

authorizes changes of use or the transfer of state water rights provided that the change or

transfer does not adversely affect an existing use of a Tribal water right. Section

85-20-901, MCA, Art. IV Sec. D.2. Nevertheless, the Objectors’ main contention here is

the future potential problems that might arise with the administration of water rights

under the Compact. Not only is it speculative but it is also beyond the scope of our

review. The Objectors have failed to meet their burden to prove the Compact materially

injures them with respect to closure of the smaller basins.

¶36 The Objectors argue that the State negotiated contrary to public interest. The

Objectors also claim that the Compact is overreaching because the Tribe was given

250,000 extra AFY for the maintenance of the Blue Ribbon Fishery. The Objectors

suggest that the Montana Constitution declares that the water is for the benefit of the

people (in this case for private appropriation) and reserving that water for the

maintenance of the fishery is inappropriate. However, this argument does not stand up to

scrutiny. Allocation of water for public recreation and maintenance of aquatic life is not

inconsistent with the public interest. Pursuant to the Montana Constitution, “waters

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within the boundaries of the state [are] the property of the state for the use of its people.”

Mont. Const. art. IX, § 3(3). The Compact has been ratified by the Legislature and it is

squarely within the authority of the Legislature to reserve water for public and

recreational use. Reserving water for “public recreational purposes and for the

conservation of wildlife and aquatic life” is for the benefit of the public. Sections

85-1-101(5), 85-2-102,MCA; Mont. Trout Unlimited v. Beaverhead Water Co., 2011 MT

151, ¶ 30, 361 Mont. 77, 255 P.3d 179. Allocating water for the maintenance of aquatic

life does not constitute an “extra” allocation to the Tribe nor does it make the Compact

overreaching. Thus, the Objectors have failed to meet their burden to prove the Compact

materially injures them with respect to the maintenance of the fishery.

¶37 Under the circumstances as presented in this case, the Crow Water Compact is

presumed valid and the Objectors carry a heavy burden of proof. The Objectors fail to

meet their burden of showing that the Compact was unreasonable and materially injures

their interest. We cannot conclude that the Water Court committed clear error in its final

order.

¶38 Issue Three: Did the Crow Compact negotiation process violate the Objectors’ due process rights?

¶39 The Objectors submit that the Compact approval process violated their due

process rights under the Montana Constitution. Mont. Const. art. II, § 17. They further

claim they did not have a meaningful opportunity to be heard and cite Crismore v.

Montana Board of Outfitters. “Procedural due process requires both notice of a proposed

action and some form of hearing that provides a meaningful and timely opportunity to be

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heard before property is taken.” 2005 MT 109, ¶ 15, 327 Mont. 71, 111 P.3d 681.

However, the record shows that the negotiation sessions were open to the public, noticed

drafts were made public for their review in advance, and the Montana Legislature

solicited public comments and held public meetings. Therefore the Compact did not

violate the Objectors’ due process rights because Objectors had opportunities to be heard

andtocomment on the Compact.

The Water Court’s final order is affirmed.