HELENA – The Montana Supreme Court told utility PPL Montana on Tuesday that it owes the state $40 million in current and back rent — along with more in future rents — for use of the riverbeds where hydroelectric dams sit.
The order came as Gov. Brian Schweitzer was considering budget cuts to fend off a looming cash crunch, and it stands to provide the state with another multimillion dollar windfall following the recent deal to sell the Otter Creek coal tracks.
Montana’s high court largely backed a lower court’s order that the riverbed is state-owned land, and anyone who uses it has to pay rent or royalties like those who graze cattle or drill for oil on public land.
PPL Montana unsuccessfully countered that the dams were governed by the federal licenses it held for the projects, and were not subject to the state claims. A company spokesman said Tuesday that the company was reviewing its options.
Company spokesman David Hoffman also cautioned others who use the state waterways that they could be targeted next.
“We are disappointed in the ruling,” he said. “I think it still has adverse implications for other water users.”
The court’s ruling also said that PPL must negotiate a new lease with Montana for future use. That moves the issue to the Montana Land Board, run by the Montana’s five statewide elected officials.
PPL bought its dams from the now-defunct Montana Power Co., and is not a regulated utility like the prior owner. After utility deregulation, PPL is allowed to sell the power at market prices.
Montana Attorney General Steve Bullock welcomed the high court’s ruling.
“Today’s decision is a victory for generations of Montanans and confirms what we’ve known all along: our rivers belong to the people of Montana, not out-of-state corporations,” he said.
Bullock again disputed the warning from PPL that others could lose under the ruling. The attorney general said the high court made it clear that farmers and ranchers who use riverbeds for irrigation are not under the same rental obligations as the power companies.
His office said that since PPL is a deregulated electricity generator, the cost of the payments will have to come from corporate coffers and not Montana ratepayers.
Schweitzer is already easing up on budget cutting plans due to the Otter Creek deal, which is expected to provide $85 million in upfront payments to the state along with future royalties. With the Tuesday’s court order, he could now be looking at another big infusion of cash.
“The hits keep coming. Sometimes good news brings good news,” Schweitzer said.
The dispute began in October 2003 when two Gallatin County residents, later joined by the state and Great Falls elementary and high school districts, sued the utilities for compensation for use of the riverbeds for their dams. They argued that the state riverbeds are part of the school trust lands, but the utilities hadn’t paid to use them.
The courts later said only the state had standing in the case, and the others were removed from the lawsuit.
The state had also sued two smaller owners of dams in the state. Avista and PacifiCorp earlier agreed to pay annual rent of $4 million and $50,000 respectively.
The Montana Supreme Court did disagree with the lower court which classified the riverbeds as “school trust lands.” The high court, in a split 5-2 decision, said it finds them to be general public trust lands, which has little effect on the end result.
And even though the court set a price for back rent, the state Land Board can negotiate its own formula for future rents, Justice Patricia Cotter wrote for the majority.