Romanticism and nostalgia; everyone who lives in the Gallatin Valley seems to develop one or both. In the face of dramatic growth, residents lament that the area can’t be frozen at some point in time. For some, that point would recall a farming and ranching population to a place where the cultural center was a small agricultural college. For others it might be when the phrase “speed limit” was synonymous with “reasonable and prudent,” or when 19th avenue ended in a dirt road and a trip to Costco meant driving to Billings. Regardless, when people first discover Bozeman’s constellation of natural and cultural features they often decide that growth should halt.

Yet, especially in recent years, population and economic growth have been substantial. It has created a larger demand for the natural resources upon which modern society depends and for the amenities that flavor it. Water is such a resource. For most of Montana’s existence, its water supplies have accommodated the population’s demands. However, a growing population and corresponding increase in demand for municipal water necessitate regulatory changes. Water allocation should continue to change in order to satisfy the demands presented by a growing population.

The State of Montana claims all water within its boundaries. Every river, every aquifer, and every molecule of atmospheric water is constitutionally defined as Montana’s property. It possesses this water “for the use of its people ... subject to appropriation for beneficial uses.”

The policy governing these water rights has evolved since Montana was a territory. Before statehood, rights to the use of water were granted on the basis of the Prior Appropriation Doctrine. Simply put, “first in time is first in right,” or colloquially, “first-come, first-served.” For most of Montana’s history, such rights were largely informal; farmers, ranchers, and miners diverted streams and rivers and used the water that they needed. Registration of these rights with the county clerk was optional and performed only occasionally.

However, a growing population prompted a more structured system. Having recognized that “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,” the legislature and people approved Montana’s 1972 constitution and the 1973 Montana Water Use Act. Together, these form the foundation for the system that continues.

The new system instituted two general changes. First, it required water rights to be tracked and formally recognized through a permitting system. Second, responsibility for managing and regulating water rights in the state was delegated to seven agencies: the Department of Natural Resources and Conservation (DNRC), the Montana Water Court (MWC), the District Courts, the Reserved Water Rights Compact Commission, the Attorney General, the Water Policy Interim Committee, and the Environmental Quality Council. The most significant of these, with regard to the majority of water rights issues, are the DNRC and the MWC. The DNRC is responsible for managing and permitting water uses that originate after June 30, 1973. It is also responsible for maintaining records pertaining to all water permits, permit changes, reservations, and claims in the State of Montana (including those that originate before 1973). The DNRC also provides technical support and information to the MWC.

The MWC is responsible for adjudicating claims for water rights that existed before July 1, 1973. The passage of the Montana Water Use Act initiated adjudication of water rights claims. Each person possessing rights to water was required to file a claim to that water. Subsequently, each claim was or will be investigated by the DNRC and adjudicated by the MWC. Paralleling the permitting requirements, each claimant was required to provide evidence indicating the quantity and times of water use, the approximate date that this use was begun, and evidence of beneficial use. Upon successful completion of the claim process, the WMC issues a final decree and the DNRC issues a “Certificate of Water Rights” to the decreed rights holder. After almost 40 years, this adjudication process continues.

While the system for tracking, permitting, and adjudicating water rights was made more formal, the criteria for receiving and holding rights remained relatively unchanged. In order to be issued and maintain a right, an applicant must divert water and demonstrate that it is put to a beneficial use, such as irrigation or domestic use. Each right is then given precedence based upon the date that the application was received, or, in the case of rights pre-dating 1973, based upon the date water was first used. In this way, a “senior” rights holder is granted all of the water that his right allows before any “junior” holders are allowed any water. Thus, preference is not based upon the type of water use, but is instead based solely upon the chronology in which rights were granted.

This system often results in fulfillment of every right holder’s water demands in the spring and early summer, while late season shortages follow. Consequentially, junior rights holders may be left without water in the late summer when water levels are lower. This result, which will be exacerbated as population, and the corresponding demand for water grows, is caused by the relationship between the rights system and Montana weather. Further complicating the issue, municipal water supplies are often filled by relatively junior rights.

Additionally, demand for urban water is constantly growing. For example, the demand for water is projected to meet and exceed existing municipal water supplies in the Gallatin County by 2017, according to Salar Properties, LLC (which used data from the 2007 Belgrade Water Master Plan, the City of Bozeman Water Facility Plan, Big Sky’s Water System Source Capacity Plan, the Total Manhattan Annual Water Budget of September 11, 2008, and the Census Bureau population estimates). Thus, there is a need to expand water supplies in Gallatin County to satisfy growing domestic water demand.

Generally, there are two strategies by which this may be accomplished: more effective use of existing water rights and exploitation of new water sources. The latter, of course, tends to be the default solution, and may often successfully allay water concerns for quite some time.

The City of Bozeman, for example, applied for and received a water reservation right for Sourdough Creek with a resulting priority date of 1985 and a maximum allocation of 6,000 acre-feet (1.96 billion gallons) per year. Reservations allow government agencies to apply for water rights, in order to meet projected future water demand. They differ from other water rights because they do not require the government agency to prove that an immediate beneficial use exits. Reservations also allow government agencies to claim rights with a greater level of seniority than they otherwise might be able, since they can claim them years before putting them to use. Bozeman’s reservation provides the city with the option of using a greater amount of Sourdough Creek water in the future, potentially meeting demand until between 2020 and 2025. Developing such reserved rights is expensive, however, and would require the city to build a small reservoir, install new piping, and create other similar infrastructure, while navigating environmental impacts and potential legal implications.

Thus, to ensure that the city receives the amount of water demanded, it would be prudent to increase supply without investing in large infrastructure projects and without relying almost exclusively on new, junior rights. Both goals may be accomplished through reallocating existing uses.

An example of such an approach is the Gallatin Gateway reservoir project that was proposed by Salar Properties, LLC. The project calls for the construction of a small reservoir, which would have a capacity of approximately 3,000 acre-feet and be fed by either or both the Farmer’s and West Gallatin Canals. Currently, each canal is primarily used for irrigation by farmers and ranchers.

However, there is often excess water in the spring and early summer. By not taking advantage of this excess water, the owners of the rights are not collecting their maximum value. Addressing this issue, the proposed reservoir would buy and collect water from both canals, especially when there is excess water, unused by spring irrigation. The collected water may then be used for other, higher value uses, such as municipal water.

Thus, the project provides numerous advantages. By selling water excesses, the shareholders of the canals could realize more of their water’s value. Indeed, the value of water in urban use, which is primarily consumed in households, is easily worth many times more than the value of water used for agricultural irrigation. Additionally, the shareholders would be able to continue irrigation by maintaining some of their water rights, while selling the excess to make a profit and to create a potential steady supply of water during the summer and fall months.

Third parties, to whom excess water could be sold, may also benefit. Municipal water supplies, for example, gain access to relatively senior rights (dating to 1883 in the case of the West Gallatin Canal) that could provide water when levels are low. Additionally, these supplies can be obtained at a relatively low public, taxpayer expense. Regardless, the cost to municipalities will be reduced in the proposed project since Salar Properties plans to privately fund and build the reservoir and associated infrastructure.

The biggest impediment to the development of these rights, however, is the way that the Montana legal system structures them and allows for their exchange. Especially for projects like Salar Properties’, the permitting process might formerly have been prohibitive, since the project does not demonstrate an immediate beneficial use or a population to supply, but does have the potential to facilitate growth and provide future consumers with water. As previously mentioned, rights holders must demonstrate beneficial use of the appropriated water when water rights are permitted or transferred.

This hurdle has, however, been lowered by the passage of the 2011 Montana Legislature’s House Bill 24. The bill allows for a grace period of up to 20 years for projects to complete the rights transfer process. As long as they are intended for “the purpose of aquifer recharge or mitigation or for the purpose of marketing water for aquifer recharge or mitigation” water rights may be allocated. Here, mitigation is defined as “reallocation of surface water ... to offset adverse effects resulting from net depletion of surface water.” Thus, the passage of this bill significantly lowered the barriers for private companies and social entrepreneurs to develop water supplies for future use.

This promotes a more responsible and effective water development strategy. In effect, the bill has raised the status of individuals and companies to a similar level as state agencies, with regard to their ability to receive water reservations. Prior to the passage of the bill, only state governmental subdivisions were allowed to apply for reservations of water based upon future projected use. Thus, only governments were able to develop water supplies that would serve anything but an immediate need.

By allowing a 20-year grace period, however, the passage of HB 24 effectively allows companies to develop water supplies based upon projected use up to 20 years in the future. In turn, it allows entrepreneurs to do what they do best: innovate. Having given entrepreneurs access to water development, we can expect new and creative solutions to inadequate water supply.

While barriers still exist to projects like Salar Properties’ (coordination between the many parties that are inherently involved in any water rights transfer scheme, for example), HB 24 has significantly lowered some of them. Montana’s reformed and evolving water policies bode well for future water development in Montana.