Judge Pauses Water Permit for Lakeside Development, Allowing For Administrative Review

The water permitting process for a resort development in Lakeside is stalled after a judge’s order last week temporarily halted the permit application while it undergoes judicial review.

The Lakeside County Water and Sewer District applied for a water use permit from the Department of Natural Resources and Conservation (DNRC) in April last year. The permit proposes to divert 249 acre feet, or 81 million gallons, of groundwater each year to a high-profile development and private golf course in Lakeside.

Proposed by the multi-national Discovery Land Company, the property, dubbed Territory 1889, currently has a preliminary plat approved by the Flathead County commissioners for a more than 350-unit subdivision.

During the application’s objection period following the agency’s preliminary approval of the water rights permit, representatives from Citizens for a Better Flathead (CFB), North Shore Water Alliance, Ella Three LLC, and local resident Bruce Young questioned the physical and legal availability of the groundwater, along with potential adverse effects. They argue the state agency mischaracterized the availability of water in the Flathead Basin by ignoring impacts from climate change and drought, did not include other connected surface water sources, and failed to consider the Confederated Salish and Kootenai Tribes water rights in their calculations.

The DNRC dismissed the majority of the objections, saying they did not meet certain standards needed to substantiate their claims. In response, the groups filed a lawsuit against the agency, requesting a stay on the water rights permit and a judicial review of the denied objections and subsequent denial to participate in contesting the permit.

Last week, Lewis and Clark District Court Judge Michael McMahon granted the stay, in addition to granting the groups’ request for an administrative review that will require DNRC employees to present “why and how they made the decisions they did,” McMahon wrote.

“The internal thought processes and explanation of the agency employees about why and how they made the decisions they did is, by definition, relevant and ‘material’ to the legal question of whether those ultimate decisions were arbitrary and capricious,” McMahon said.

McMahon ordered evidentiary proceedings to begin within 45 days, mandating the testimony and deposition of DNRC employees who worked on the water permit application and played a role in the decision to deny the groups’ objections. McMahon also ordered DNRC employees to file all additional evidence “for inclusion in the administrative record.”

“That evidence is material because it goes directly to whether the agency decision was made upon unlawful procedure, violated petitioners’ statutory and constitutional participation rights, and resulted in a materially incomplete administrative record,” he wrote.

He handed the case over to be heard in the Flathead County District Court per a request from the water and sewer district, which joined the case as an intervenor.

“This ruling is a powerful affirmation of every Montanan’s right to have a voice in the decisions that shape our communities,” CBF Co-Executive Director Mayre Flowers wrote in a press release.

Citizens for a Better Flathead is also involved in other lawsuits involving the Territory 1889 development, including one that challenges the Flathead County commissioners’ approval of a variance for a commercial marina and extended dock for the resort. A Flathead County District Court judge temporarily halted construction of the dock, but ruled the development of the marina can continue.

Rick Tappan, a legal representative for the water and sewer district and Discovery Land Company, said the judge’s order on the water permit does not affect the rest of the Territory 1889 development.

“The stay created by the district court’s order stays the underlying water permit case until the district court determines whether DNRC erroneously rejected the objections of the petitioners in the district court case,” Tappan wrote in an email to the Beacon. “Following that determination, the water permit case will continue either with the new objections or as it had prior to the petitioners’ action. All other development outside the water use permit proceeding will continue and is unaffected by the district court’s stay.”

The lake town water and sewer district is also poised to take on the development’s septic, with the subdivision’s first phase currently awaiting approval from the Department of Environmental Quality (DEQ) on an environmental assessment. The assessment includes the public water supply for Territory 1889’s first 80 homes, noting the DNRC water permit would transfer “ownership, operation and maintenance” of two public wells to the district for the development’s water supply.

As of Thursday, a spokesperson for DEQ said officials were reviewing McMahon’s stay order on the water permit to determine any impact on the environmental assessment.  

Graham Coppes and Emily Wilmott, representing CBF and the other petitioning parties in the lawsuit, expect that the temporarily pause will allow about a year of “breathing room” on the water rights permit. They pointed to other cases they’ve worked on involving the availability of water in the Flathead Basin, including a proposed water bottling plant in Creston granted water rights by the DNRC that was ultimately voided by the Montana Supreme Court.

In the groups’ water permitting case with DNRC, Coppes said they’re hopeful that the lawsuit could potentially have positive downstream impacts regarding public participation in other water rights cases.

“This was a big win in that regard,” Coppes said. “It halts the entire proceeding while we litigate.”

He pointed to McMahon’s belief the groups are likely to succeed on their merits.

“Based upon the present record, this court agrees with petitioners that there appears to be significant and material factual and legal deficiencies intertwined and connected with respondent’s unilateral decision to forever muzzle petitioners’ public comments and objections (as well as participation in the underlying contested case proceeding) to the updated preliminary determination relative to intervenor’s application,” McMahon wrote.

“As such, petitioners have made a strong showing that they are likely to succeed on the merits in this judicial review proceeding against respondent and intervenor.”

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