No. 13367
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1976
MONTANA DEPARTMENT O NATURAL
F
RESOURCES AND CONSERVATION,
P l a i n t i f f and A p p e l l a n t ,
INTAKE P7ATER COMPANY, a
Delaware C o r p o r a t i o n ,
D e f e n d a n t and R e s p o n d e n t .
A p p e a l from: D i s t r i c t Court of t h e Seventh J u d i c i a l D i s t r i c t ,
H o n o r a b l e Thomas D i g n a n , J u d g e p r e s i d i n g .
Counsel of Record:
For Appellant:
Eoone, E a r l b e r g and Haddon, M i s s o u l a , Montana
Sam E. Haddon a r g u e d and W i l l i a m T . Boone a p p e a r e d ,
M i s s o u l a , Montana
Ted Doney a p p e a r e d , H e l e n a , Montana
R o b e r t T . Cumrnins a p p e a r e d , H e l e n a , Montana
For Respondent :
L o b l e , P i c o t t e and P a u l y , H e l e n a , Montana
Henry L o b l e a r g u e d and P e t e r IT. P a u l y a r g u e d . ,
Helena, J"intana
Boyd L . Henderson a p p e a r e d , H o u s t o n , T e x a s
Su.bmitted: October 2 8 , 1 9 7 6
Filed:
Mr. Justice Frank I. Haswell delivered the Opinion of the Court.
The Montana Department of Natural Resources and Con-
servation filed an action seeking a declaratory judgment that
Intake Water Company does not have a valid appropriation of
80,650 acre feet per year of the waters of the Yellowstone
River and enjoining Intake from use of the water. Intake counter-
claimed for a declaratory judgment that it has complied with
Montana water appropriation statutes to date and upon continued
diligent prosecution of the excavation and construction of the
diversion works to completion, it is entitled to relate the
priority of its appropriation back to June 8, 1973. The district
court, Dawson County, the Hon. Thomas Dignan, district judge
presiding without a jury, entered judgment in favor of Intake.
The Department of Natural Resources and Conservation appeals.
Plaintiff and appellant is the Montana Department of
Natural Resources and Conservation (DNR), an administrative
agency of the State of Montana created pursuant to Chapter 15,
Title 82A, R.C.M. 1947, whose duties include the administration
of water use laws. Defendant, counterclaimant and respondent
is Intake Water Company (Intake), a Delaware corporation and
wholly owned subsidiary of Tenneco, Inc. Intake is authorized
to do business in Montana and its corporate powers include the
right to appropriate waters, acquire water rights, and sell
the water to customers and users in the manner of a private
water company, including the construction of dams, reservoirs
and water transmission facilities.
The subject matter of this litigation is a project by
Intake involving the appropriation of 80,650 acre feet per year
of the waters of the Yellowstone River near the community of
Intake in Dawson County, Montana. A diversion facility is to
be constructed on land owned by the United States whereby water
w i l l be pumped o u t o f t h e r i v e r , conveyed by p i p e l i n e s t o a n
o f f - s t r e a m s t o r a g e r e s e r v o i r , and from t h e r e d i s t r i b u t e d by
pipelines t o the service area. Intake intends t o s e l l the
water t o i t s customers f o r i r r i g a t i o n , i n d u s t r i a l , municipal
and d o m e s t i c use.
The s e r v i c e a r e a o r a r e a of i n t e n d e d u s e of t h e a p p r o p r i a t e d
waters a r e p o r t i o n s of Dawson and Wibaux C o u n t i e s i n Montana and
a p o r t i o n o f Golden V a l l e y County, North Dakota. The s e r v i c e
a r e a l i e s g e n e r a l l y i n a s o u t h e a s t e r l y d i r e c t i o n from t h e p o i n t
o f d i v e r s i o n some 30 m i l e s . T h i s a r e a c o n t a i n s l a r g e c o a l res-
e r v e s which form a l a r g e p a r t of t h e w a t e r demand f o r t h e p r o j e c t .
The s i z e o f t h e s e r v i c e a r e a was p r i m a r i l y d e t e r m i n e d by t h e ex-
t e n t of usable c o a l reserves.
DNR c l a i m s t h a t t h e i n t e n d e d u s e o f t h e a p p r o p r i a t e d
w a t e r s i s p r i m a r i l y f o r a c o a l g a s i f i c a t i o n p l a n t f o r t h e produc-
t i o n o f s y n t h e t i c g a s t o supplement d e c l i n i n g n a t u r a l g a s r e s e r v e s .
J a c k T i n d a l l , g e n e r a l manager of I n t a k e and a n o f f i c i a l o f
Tennessee G a s T r a n s m i s s i o n Company, a Tenneco s u b s i d i a r y , which
i s a major n a t u r a l g a s p i p e l i n e system t h a t s u p p l i e s g a s t o i t s
c u s t o m e r s , t e s t i f i e d t h a t he became i n v o l v e d i n t h e I n t a k e p r o j -
e c t b e c a u s e Tenneco and i t s s u b s i d i a r i e s were l o o k i n g f o r a l t e r -
n a t e s u p p l i e s o f n a t u r a l g a s and w a t e r i s needed t o c o n v e r t c o a l
t o gas. While d e n y i n g t h a t Tenneco o r i t s s u b s i d i a r i e s had any
s p e c i f i c plans t o c o n s t r u c t a c o a l g a s i f i c a t i o n p l a n t a t t h e time
o f t r i a l , h e a d m i t t e d t h e y w e r e working on it and t h a t Tenneco
and i t s s u b s i d i a r i e s c o u l d be o n e o f t h e i n d u s t r i a l c u s t o m e r s
f o r w a t e r from t h e I n t a k e p r o j e c t . T i n d a l l t e s t i f i e d t h a t he
made t h e d e t e r m i n a t i o n o f t h e amount of I n t a k e ' s a p p r o p r i a t i o n - -
80,650 a c r e f e e t p e r year--by t h e amount needed t o u t i l i z e t h e
c o a l i n t h e a r e a of i n t e n d e d u s e (64,000-65,000 a c r e f e e t annu-
a l l y ) p l u s o t h e r u s e s and l o s s e s t h a t would b r i n g t h e t o t a l t o
80,650 acre f e e t p e r y e a r .
The o f f - s t r e a m r e s e r v o i r i n v o l v e d i n t h e p r o j e c t w i l l
be a p p r o x i m a t e l y 25,000 a c r e f e e t i n c a p a c i t y and w i l l i n u n d a t e
a p p r o x i m a t e l y 700 acres o f l a n d . The p u r p o s e of t h i s r e s e r v o i r
i s t o permit diversion of t h e r i v e r waters during periods of
s u r p l u s w a t e r s and s t o r a g e o f such w a t e r s f o r u s e d u r i n g t h e
p e r i o d s of low w a t e r i n t h e r i v e r . T h i s s y s t e m , it i s c l a i m e d ,
w i l l minimize t h e impact o f t h e d i v e r s i o n on t h e r i v e r i t s e l f
and i n s u r e t h e a v a i l a b i l i t y o f w a t e r f o r p r i o r a p p r o p r i a t o r s
and u s e r s downstream.
There i s a n e x i s t i n g dam t h a t c r e a t e s a backwater i n
t h e r i v e r a t t h e d i v e r s i o n s i t e which p e r m i t s t h e t a k i n g o f w a t e r
w i t h o u t t h e c o s t and e n v i r o n m e n t a l consequences o f c o n s t r u c t i n g
a n o t h e r d i v e r s i o n dam a c r o s s t h e r i v e r .
The p r o j e c t c o n t e m p l a t e s removal of w a t e r s from t h e
Yellowstone R i v e r b a s i n and s a l e o f some o f t h e s e w a t e r s o u t s i d e
t h e b a s i n i n North Dakota. Such removal r e q u i r e s unanimous con-
s e n t o f Montana, North Dakota and Wyoming under A r t i c l e X of
t h e Yellowstone River Compact and r e q u i r e s c o n s e n t of t h e Montana
l e g i s l a t u r e under s e c t i o n 89-846, R.C.M. 1947. Neither consent
h a s been s e c u r e d t o d a t e . I n t a k e commenced a n a c t i o n i n f e d e r a l
c o u r t i n J u n e , 1973 t o have s e c t i o n 89-846 and A r t i c l e X o f t h e
Yellowstone R i v e r Compact d e c l a r e d u n c o n s t i t u t i o n a l . (Civil
Docket No. 1184, United S t a t e s D i s t r i c t C o u r t f o r t h e D i s t r i c t
C o u r t of Montana, B i l l i n g s D i v i s i o n ) . T h i s s u i t h a s n o t been
concluded t o d a t e .
According t o t h e t e s t i m o n y o f J a c k T i n d a l l , g e n e r a l man-
a g e r of I n t a k e , t h e p r o j e c t would s t i l l be e c o n o m i c a l l y f e a s i b l e
i f i n d u s t r i a l u s e r s w e r e excluded and o n l y a g r i c u l t u r a l , munici-
p a l and r e c r e a t i o n a l u s e r s remained p r o v i d e d t h e s e l a t t e r u s e r s
c o u l d pay t h e p r i c e t o p r o v i d e a f a i r r e t u r n on t h e c a p i t a l
expended f o r t h e p r o j e c t . There i s no s u b s t a n t i a l e v i d e n c e
i n d i c a t i n g whether t h e p r o j e c t would remain e c o n o m i c a l l y f e a s -
i b l e i f u s e r s o u t s i d e t h e Yellowstone River b a s i n were e x c l u d e d .
On J u n e 29, 1973 I n t a k e commenced a s u i t i n s t a t e c o u r t
s e e k i n g d e t e r m i n a t i o n of whether it must comply w i t h t h e pro-
v i s i o n s of t h e Montana Major F a c i l i t y S i t i n g Act (Ch. 8 , T i t l e
70, R.C.M. 1 9 4 7 , a s amended) i n c o n s t r u c t i n g i t s d i v e r s i o n works
f o r a p p r o p r i a t i o n o f t h e w a t e r s of t h e Yellowstone R i v e r . (Civil
Docket 36907, d i s t r i c t C o u r t , f i r s t j u d i c i a l d i s t r i c t , S t a t e of
Montana, L e w i s and C l a r k County.) This s u i t remains unresolved
t o date.
During t h e p e r i o d s i n c e i n c e p t i o n of t h e p r o j e c t i n
November, 1972 t h r o u g h September, 1975, I n t a k e h a s expended
$331,700.39 on s i t e - r e l a t e d a c t i v i t i e s , e n g i n e e r i n g , market
s t u d i e s , e n v i r o n m e n t a l a c t i v i t i e s , l e g a l f e e s and a d m i n i s t r a t i v e
expenses d i r e c t l y a t t r i b u t a b l e t o c o n s t r u c t i o n of t h e p r o j e c t .
On J u n e 8 , 1973 I n t a k e p o s t e d i t s n o t i c e of a p p r o p r i a t i o n
of t h e w a t e r s a t t h e p o i n t of i n t e n d e d d i v e r s i o n and f i l e d n o t i c e s
of a p p r o p r i a t i o n t h e r e a f t e r w i t h t h e c o u n t y c l e r k i n e a c h Montana
c o u n t y t h r o u g h which t h e Yellowstone River f l o w s a s r e q u i r e d by
s e c t i o n 89-810, R.C.M. 1947.
Thereafter Intake took t h e following i d e n t i f i a b l e a c t i o n
i n t h e 4 0 day p e r i o d f o l l o w i n g J u n e 8 p u r s u a n t t o s e c t i o n 89-
811, R.C.M., requiring the appropriators t o " * * * proceed t o
p r o s e c u t e t h e e x c a v a t i o n o r c o n s t r u c t i o n of t h e work by which
t h e w a t e r a p p r o p r i a t e d i s t o be d i v e r t e d * * *":
(1) I n a d d i t i o n t o f i l i n g c o p i e s of t h e n o t i c e of
a p p r o p r i a t i o n w i t h t h e v a r i o u s c o u n t y c l e r k s and r e c o r d e r s ,
I n t a k e f i l e d c o p i e s of t h e n o t i c e w i t h t h e d i r e c t o r of DNR and
t h e North Dakota S t a t e Water Commission.
( 2 ) I n t a k e s e l e c t e d , s t a k e d and f l a g g e d l o c a t i o n s f o r
f i v e t e s t h o l e b o r i n g s a t t h e s i t e of t h e proposed d i v e r s i o n
works to test subsurface soil conditions.
(3) Intake hired a Billings testing laboratory to
make the test hole borings and went to the site twice with
them to accomplish the same.
(4) Secured a license from the Bureau of Reclamation
to construct, operate and maintain a pumping plant at the pro-
posed diversion site.
(5) Filed and proceeded to prosecute the state court
suit to determine whether Intake must comply with the Montana
Major Facility Siting Act with respect to construction of its
diversion works.
(6) Filed and proceeded to prosecute the federal court
suit to determine the constitutionality of section 89-846 and
Art. X of the Yellowstone River Compact.
(7) Contacted environmental consultants and governmental
agencies with respect to required environmental work on the
project.
(8) Continued the ongoing drafting of preliminary engineer-
ing plans for construction of the diversion works.
(9) Continued the ongoing selection, pricing and avail-
ability of equipment for the diversion works.
(10) Continued the ongoing legal and administrative work
necessary to construction of the diversion works and completion
of the appropriation.
(11) Commenced and continued preparation of the design
drawings of the diversion works.
Following this 40 day period up to the time of trial,
Intake sponsored a paddlefish study proposed by the Montana Fish
and Game Department at a cost to Intake of $5,000; defended the
instant suit; hired an environmental consulting firm in Billings
to conduct an environmental literature search at a cost to Intake
of $4,000; hired an engineering firm in Billings to conduct a
preliminary engineering survey of the proposed diversion in-
cluding hydrology studies, a recommended operating plan, and
identification of three potential locations for an off-stream
reservoir; hired a Houston, Texas firm to perform topographic
mapping including topographic contours of 61,660 acres of land
in the vicinity of Intake to enable Intake to select reservoir
sites, pipelines, and aqueduct routes at a cost to Intake of
$8,011.77; hired a Denver, Colorado firm to conduct a water
marketing study of the demand of water for industrial use in
the area of contemplated use; sponsored a study of the aquatic
invertebrate life in the Yellowstone River at the request of
the Montana Fish and Game Department at a cost to Intake of
$50,000; hired a Billings firm to conduct a water demand study
for agricultural, municipal and rural domestic use in the con-
templated area of use, and secured cross-section data of the
profile of the river channel at the point of diversion, took
water meter readings, and established a velocity distribution
curve.
Future contemplated activities leading to eventual com-
pletion of construction of the project and the impoundment of
water in the reservoir in January, 1982 include survey and
geological investigation of the three potential reservoir sites;
socio economic data gathering; review of mitigating measures;
climatic and water quality studies;
environmental air quality studies;/migratory waterfowl, vegetation
and wildlife studies; preparation of an environmental impact
report for use by the Bureau of Reclamation, U. S. Department of
the Interior, in preparing their environmental impact statement
as required by National Environmental Policy Act and the terms
of Intake's license; selection of a reservoir site; final engineer-
ing design of the diversion work; updating hydrological studies,
water market and water demand studies; historical and archaelogical
studies; procurement of a construction permit from the U. S.
Army Corps of Engineers; formulation of operating and mainten-
ance plans for the reservoir and diversion works; various ac-
tivities in connection with the environmental impact statement,
public hearings and adoption; land acquisition for the reservoir
site; resurveys as necessary; negotiation of water sale contracts;
actual construction of the diversion works and reservoir by
the contractor; completion of the two pending lawsuits in federal
and state court; additional legal and administrative work in-
volved in the completion of construction of the project.
Cost estimates on the project vary depending on the
location of the off-stream reservoir, the pipeline distance
from the diversion site and the diversion site. Three cost
estimates were made depending on which of three reservoir sites
was ultimately selected. These estimates varied from a low of
$12,753,000 to a high of $22,326,000, depending on location of
the reservoir site.
The projected schedule at the time of trial for these
future activities contemplated a final environmental impact
statement by the Bureau of Reclamation in the spring of 1979;
the commencement of construction by the contractor in mid-summer
of 1979 and completion of construction about 2-1/2 years later;
and impoundment of water in the off-stream reservoir in January,
1982.
The instant suit was filed by DNR against Intake on
September 7, 1973. Following completion of pleadings and pre-
trial discovery, the case was tried in November, 1975. On
January 8, 1976 the district court made and filed extensive and
detailed findings of fact and conclusions of law. A judgment
and decree based on these findings and conclusions was entered
on the same date. The judgment provided in summary that:
(1) Intake fully complied with legal requirements in
posting and filing its Notice of Water Right Appropriation
on June 8, 1973.
(2) Intake proceeded to prosecute the excavation or
construction of the diversion works within 40 days after June
8, 1973 pursuant to section 89-811, R.C.M. 1947.
(3) All of Intake's activities up to the time of trial
constitute prosecution or construction of the work by which
the water is to be diverted with reasonable diligence and which,
if prosecuted with reasonable diligence to completion, entitles
Intake to relate back the priority of its appropriation to June
8, 1973.
(4) In the event it is ultimately determined in the
state court suit that Intake must comply with the provisions of
the Montana Major Facility Siting Act of 1973, any conforming
actions taken by Intake constitutes prosecution or construction
of the work by which the water appropriated is diverted which if
prosecuted with due diligence to completion, entitles Intake
to relate back the priority of its appropriation to June 8, 1973.
(5) Intake's appropriation of June 8, 1973 is complete
as of that date to the full amount of water its facilities are
capable of diverting up to 80,650 acre feet per year for sale
and distribution to users for agricultural, industrial, munici-
pal and domestic purposes when its off-stream reservoir and
diversion works are completed and Intake is ready and willing to
deliver water to users and offers to do so.
DNR has appealed from this judgment and sets forth three
issues for review on appeal:
(1) Is Intake the owner of a valid appropriation of
80,650 acre feet per year of the waters of the Yellowstone River
as of June 8, 1973?
(2) Did Intake comply with section 89-811, requiring
that it proceed to prosecute the excavation or construction
of the work by which the water appropriated was to be diverted
within 40 days of posting of its notice of appropriation?
(3) Do considerations of equity and public policy
preclude Intake from claiming an inchoate right to appropriate
80,650 acre feet per year of the waters of the Yellowstone River?
The contentions of the respective parties illuminate
the underlying determinations we must make in this appeal. DNR
basically claims that Intake is not the owner of an existing
appropriation right at all because such right cannot come into
being until all statutory requirements are met and construction
is completed; that Intake has lost whatever inchoate rights it
may have acquired by posting and filing its notice of approp-
riation on June 8, 1973 by its failure to " * * * proceed to prose-
cute the excavation or construction of the work by which the water
appropriated is to be diverted * * *" within 40 days after posting
its notice of appropriation; that because of a number of legal
and practical hurdles that must be overcome in order to construct
the project which are totally beyond Intake's ability to control,
and because construction will take years to complete, consider-
ations of equity and public policy preclude entry of an open
ended decree wherein the fate of over 80,000 acre feet per year
of the water of the Yellowstone River will remain unknown and
in a state of limbo for many years.
Intake, on the other hand, contends that it is the owner
of an existing right by virtue of the posting and filing of its
notice of appropriation on June 8, 1973 and its various activities
both before and after that date; that it did in fact " * * * pro-
ceed to prosecute the excavation or construction of the work by
which the water appropriated is to be diverted * * *" within 40
days after posting its notice of appropriation; that it has at
all times " * * * prosecute[d] the same with reasonable dili-
gence * * *" toward completion; and that despite the number of
legal and practical hurdles it must overcome to actually complete
construction of the project, it is entitled to try to surmount
these and as long as it proceeds with reasonable diligence to
that end, its right to "relation back" of its priority of appro-
priation to June 8, 1973 is not lost.
We note that as a practical matter Intake posted and
filed its notice of appropriation some 22 days before Montana's
new Water Use Act of 1973 became effective; and unless the statu-
tory requirements then existing have been and are met by Intake,
it is not entitled to relate the priority of its appropriation
back to June 8, 1973 and becomes subject to the provisions of
the Water Use Act of 1973. We do not suggest that Intake is sub-
ject to criticism in doing this or that Intake was motivated by
this consideration. In fact the evidence shows that the inception
of the project occurred in November, 1972 before the 1973 legis-
lature even met. We simply note the existence of this situation
to place the present controversy in perspective.
We further observe that the issues on appeal fundamen-
tally involve the existence and nature of the right acquired by
Intake by virtue of its activities to the date of trial.
An overview of the Montana law on appropriation of water
and the establishment of water rights and their priority is
desirable at the outset.
The statutory law in this area is essentially contained
in three statutes:
"89-810. Notice of appropriation. Any person here-
after desiring to appropriate the waters of a
river, or stream, ravine, coulee, spring, lake,
or other natural source of supply concerning which
there has not been an adjudication of the right to
use the waters, or some part thereof, must post
a notice in writing in a conspicuous place at
the point of intended diversion, stating therein:
"1. The quantity of water claimed, measured as
hereinafter provided;
"2. The purpose for which it is claimed and
place of intended use;
"3. The means of diversion, with size of flume,
ditch, pipe, or aqueduct, by which he intends to
divert it;
"4. The date of appropriation;
"5. The name of the appropriator.
"Within twenty days after the date of appropria-
tion the appropriator shall file with the county
clerk of the county in which such appropriation
is made a notice of appropriation, which, in
addition to the facts required to be stated in
the posted notice, as hereinbefore prescribed,
shall contain the name of the stream from which
the diversion is made, if such stream have a name,
and if it have not, such a description of the
stream as will identify it, and an accurate des-
cription of the point of diversion of such stream,
with reference to some natural object or permanent
monument. The notice shall be verified by the
affidavit of the appropriator or some one in his
behalf, which affidavit must state that the matters
and facts contained in the notice are true.
"89-811. Diligence in appropriating. Within forty
days after posting such notice, the appropriator
must proceed to prosecute the excavation or construc-
tion of the work by which the water appropriated is
to be diverted, and must prosecute the same with
reasonable diligence to completion. If the ditch
or flume, when constructed, is inadequate to convey
the amount of water claimed in the notice aforesaid,
the excess claimed above the capacity of the ditch
or flume shall be subject to appropriation by any
other person, in accordance with the provisions of
this chapter.
"89-812. Effect of failure. A failure to comply
with the provisions of this chapter deprives the
appropriator of the right to the use of water as
against a subsequent claimant who complies therewith,
but by complying with the provisions of this chapter
the right to the use of the water shall relate back
to the date of posting the notice."
The parties to this litigation apparently concede that
what constitutes compliance with the statutory requirement that
the appropriator must " * * * proceed to prosecute the excavation
or construction of the work * * * " within 40 days after posting
the notice of appropriation under section 89-811 has never
been the subject of direct interpretation by this Court. DNR
relies on the language of the statute, dictionary definitions
of the words used, analogies drawn from Montana cases and those
from other states interpreting statutes relating to oil and gas
drilling operations, water wells, and priorities under mechanics
lien laws to support its contention that Intake's activities were
at most preliminary work and do not rise to the level of exca-
vation or construction of the work by which the water is to be
diverted. Intake, on the other hand, equally relies on the
statutory language, contends it must be reasonably applied in
view of the magnitude of the project and the legal and practical
hurdles that must be overcome, and refers us to a number of
Colorado cases wherein similar decrees to that entered in the
instant case have been granted to provide the necessary assur-
ances in multi-million dollar projects of great magnitude, com-
plexity and completion time. See Taussig v. Moffat Tunnel Water
& Development Co. (1940) 106 Colo. 384, 106 P.2d 363; Metropoli-
tan Suburb. Water v. Colorado River Water (1961) 148 Colo. 173,
365 P.2d 273; Four Counties Water Users Ass'n v. Colorado River
Water C.D. (1966) 159 Colo. 499, 414 P.2d 469; Colorado River
Water Conservation Dist. v. Twin Lakes R. & C. (1970) 171 Colo.
561, 468 P.2d 853; Elk-Rifle Water Company v. S. H. Templeton
(1971) 173 Colo. 438, 484 P.2d 1211; Colorado Water Cons. Dist.
v. Twin Lakes R. & C. Co. (1973) 181 Colo. 53, 506 P.2d 1226.
Continuing with our overview, one further statute and
an administrative regulation relating to the existence and nature
of Intake's right must be noted. Section 89-867(4), R.C.M. 1947
as amended, defines an "Existing right" under the Montana Water
Use Act of 1973 in this language:
"(4) 'Existing right' means a right to the use of
water which would be protected under the law as
it existed prior to July 1, 1973."
A rule of DNR, codified as section 36-2.14J(1)-S1400 of the
Montana Administrative Code, further provides:
" (e) "Existing right', in addition to the
definition given the term by section 89-867(4)
of the Act, includes any appropriation of water
commenced prior to July 1, 1973, if completed
according to the law as it existed when the
appropriation was begun."
One further matter is material to an overview of this
appeal. The findings of fact and conclusions of law of the
district court contain this recital:
"Upon conclusion of the trial of this case, and
in response to an inquiry from the court, counsel
for the plaintiff, Mr. Chronister, conceded that
defendant had proved that it had posted its Notice
of Water Right Appropriation for Posting and filed
its Notice of Water Right Appropriation for Filing
in accordance with the provisions of Section 89-
810, R.C.M. 1947, and related statutes, and that
Intake had prosecuted excavation or construction
of the work by which the water is to be diverted
with reasonable diligence at all times since
expiration of the forty (40) day period specified
in Section 89-811, R.C.M. 1947, and to the date of
trial hereof. Mr. Chronister stated that the only
remaining issue is the contention of the plaintiff
that the defendant did not commence to prosecute
excavation or construction of the work by which
the water is to be diverted within forty (40) days
after posting of the Notice of Water Right Appro-
priation for Posting as required by the provisions
of Section 89-811, R.C.M. 1947."
We now direct our attention to the first issue on appeal,
viz., is Intake the owner of a valid appropriation of 80,650
acre feet per year of the water of the Yellowstone River as of June
The statutory requirements for a valid appropriation are:
(1) Posting a written notice of appropriation at the point of
intended diversion. Section 89-810. (2)Filing the notice of
appropriation with identification of the stream and point of di-
version. Section 89-810. (3) The appropriator must proceed to
prosecute the excavation or construction of the work by which
the water appropriated is to be diverted within 40 days after
posting notice of the appropriation. Section 89-811. ( 4 ) ~ h e
appropriator must therealfter prosecute such work with reason-
able diligence to completion. Section 89-811. If the appro-
priator completes the appropriation according to statute, the
right to the use of the water relates back to the date of post-
ing notice of the appropriation. Section 89-812.
Completion of all these steps is necessary to a complete
appropriation. Bailey v. Tintinger, (1912), 45 Mont. 154, 122
P. 575. A declaration of appropriation, unaccompanied by con-
struction of a diversion works and actual diversion of the water,
is insufficient. Miles v. Butte Electric and Power Company (1905)
32 Mont. 56, 79 P. 549. Thus the posting and filing of the notice
of appropriation is a condition precedent to a valid appropriation,
and a valid appropriation does not exist without completion of
the work and actual diversion of the water.
However, Intake is the owner of an "existing right" as
that term is defined in the Water Use Act of 1973 and the Montana
~dministrativeCode for the reasons and under the authority of
General Ag. Corp. v. Moore, 166 Mont. 510, 534 P.2d 859. There
we held that priority of appropriation of water is a valuable
right within the meaning of Article IX, Section 3, 1972 Montana
Constitution, recognizing and confirming all existing rights to
the use of any waters for any useful or beneficial purposes and
that the Water Use Act of 1973 discloses a legislative intent
consistent with this Constitutional provision. In General Ag.
Corp. we held that "use" is not limited to perfected or actual
use but that the inception of the existing right occurs when the
first step is taken to establish such use, otherwise the existing
right of priority of appropriation would be nullified.
Nonetheless the "existing right" possessed by Intake is
not synonymous with a valid appropriation. What Intake possesses
is essentially an uncompleted appropriation. Its "existing
right" will not ripen into a valid appropriation until the re-
maining statutory requirements for a completed appropriation are
met. No valid appropriation is yet in existence. Accordingly
we hold that at this time Intake is not the owner of a valid
appropriation of 80,650 acre feet per year of the waters of the
Yellowstone River as of June 8, 1973.
The principal battleground at the trial was whether
Intake had complied with section 89-811, R.C.M. 1947, requiring
that it " * * * proceed to prosecute the excavation or construc-
tion of the work by which the water appropriated is to be diver-
ted * * *" within 40 days after posting the notice of appropria-
tion on June 8, 1973. This was stated by DNR's counsel at the
beginning of the trial to be the only issue in DNR's case. At
the conclusion of the trial counsel for DNR conceded that Intake
had proved posting and filing of the notice of appropriation in
accordance with section 89-810 and that Intake had prosecuted
excavation or construction of the work by which the water is to
be diverted with reasonable diligence at all times since expir-
ation of the 40 day period specified in section 89-811 to the
date of trial.
The focus of this issue is the meaning of the words
" * * * proceed to prosecute the excavation or construction of
the work * * *". In construing a statute, the intention of the
legislature is controlling. Section 93-401-16, R.C.M. 1947.
The intc:ntion of the legislature must first be determined from
the plain meaning of the words used, and if interpretation of
the statute can be so determined, the Court may not go further
and apply any other means of interpretation. Keller v. Smith,
Mont. , 533 P.2d 1002, 33 St.Rep. 828; Dunphy v. Anaconda
Co., 151 Mont. 76, 438 P.2d 660, and cases cited therein. The
wands employed are to be given their ordinary and popular meaning
unless the context or usage indicates otherwise. Beer R. P.
Ass'n v. State Bd. of Equalization, 95 Mont. 30, 25 P.2d 128;
Burritt v. City of Butte, 161 Mont. 530, 508 P.2d 563.
Both parties concede that this Court has not heretofore
been called upon to construe the meaning of the statutory phrase
in issue here. Both rely on dictionary definitions, drawing
analogies from cases from other states construing their require-
ments and extrinsic indications of various kinds. Fundamentally,
DNR contends that the statutory phrase requires actual on-site
excavation or construction within 40 days of posting notice of
appropriation and that drilling 5 test holes along a tentative
pipeline to determine whether the diversion site selected is
capable of supporting the diversion works does not qualify.
Intake, on the other hand, contends that all of its activities
during the 40 day period are part of its ongoing program to con-
struct the project and that the legal and practical constraints
on its activities by environmental requirements of the National
Environmental Policy Act, the Yellowstone River Compact and sec-
tion 89-846, R.C.M. 1947, Montana's Major Facilities Siting Act,
the terms of its license from the Bureau of Reclamation, and
prudent engineering and financial practices in a project of this
size, complexity and magnitude preclude actual on-site excavation
and construction of the diversion works within the 40 day period.
"Proceed" is defined in Webster's New Twentieth Century
Dictionary (2d ed), in this manner:
"TO move, pass or go, forward or onward; to advance;
* * * to continue or renew motion or progress; as
to proceed on a journey; to proceed with an argument.
"To go on in an orderly or regulated manner, to
begin and carry on a series of acts or measures;
to act by method; to prosecute a design; as, to
proceed on sound principles."
"Prosecute" is defined in the same dictionary as:
"To follow or pursue with a view to reach, execute
or accomplish; to carry on; to continue; to follow
up; to go or proceed with; as to prosecute a scheme,
hope or plan."
Application of these dictionary definitions goes only
part way in interpreting the meaning of the statutory phrase.
It can fairly be said that selection, staking, flagging, and
drilling of the 5 test hole borings at the site of the diversion
works; the securing of a license from the Bureau of Reclamation
to operate and maintain a pumping plant at the diversion site; the
filing and prosecution of the suit in state court to determine
if Intake must comply with the Montana Major Facility Siting Act
and the federal suit to determine the constitutionality of section
89-846, and Article X of the Yellowstone River Compact; the on-
going drafting of preliminary engineering plans for construction
of the diversion works, the environmental contacts, the selecting,
pricing and availability of equipment for the diversion works,
and the ongoing legal and administrative work indicate that Intake
was proceeding to prosecute the project during the 40 day period.
But these dictionary definitions shed no light on whether actual
on-site excavation or construction is required in the 40 day
period.
We note that the legislature used the phrase "proceed to
prosecute" rather than "commence actual excavation or construc-
tion". Section 89-811 was first enacted in 1885 in territorial
days prior to statehood. While it may have been the common
practice in those days to post the notice of appropriation, hitch
the horse to a ditcher, run a ditch and actually apply water to
a beneficial use within 40 days, the early settlers foresaw
irrigation projects of greater magnitude and used the statutory
language that still exists. This same statutory language has
been retained and reenacted in 1887, 1895, 1907, 1921 and con-
tinues unchanged to the present time.
If the legislature had intended to require actual on-site
excavation or construction it could easily have said so as it
did in section 89-121, R.C.M. 1947, relating to storage,
diversion and control of unappropriated waters by the State
Water Resources Board, the predecessor of DNR. Section 89-121,
R.C.M. 1947, authorized the State Water Resources Board to initiate
rights to the use of waters by executing a declaration of intent
to store, divert or control the unappropriated waters of a par-
ticular body, stream or source. Such a declaration was to have
a priority of right as of the date of recording of the declara-
tion with the county clerk and recorder " * * * provided the means
of actual appropriation shall be commenced by actual work of con-
struction within four (4) years from the date of original record-
ing. * * *" (Emphasis supplied.)
A statute must be given a reasonable construction con-
sistent with its purpose. Keller v. Smith, supra and authorities
cited therein. The purpose of section 89-811 is to require reason-
able diligence in completing the appropriation or forfeiture of
the priority of the appropriation as of the day of posting the
notice of appropriation. What constitutes reasonable diligence
must be determined on an ad hoc, case-by-case basis. The law in
this area is summarized by a leading authority, Clark, Waters &
Water Rights, Vol. 6, 5514.1, pp. 308, 309, in this language:
"What constitutes due diligence is a question
of fact to be determined by the court in each
case. Diligence does not require unusual or
extraordinary effort, but it does require a
steady application of effort--that effort that
is usual, ordinary and reasonable under the
circumstances. * * * So long as the applicant
prosecutes the construction of works in good
faith with a steady effort, he should be held to
have prosecuted with diligence."
In the present case we have a multi-million dollar
project of great complexity and magnitude that will require
several years to complete. Removal of actual and potential
legal constraints arising out of Article X of the Yellowstone
River Compact, section 89-846, and Montana's Major Facility
Siting Act are in progress. Actual on-site construction of
the diversion works cannot be prosecuted until the environmental
requirements of the National Environmental Policy Act are com-
pleted and the consent of the United States is obtained under
the terms of Intake's license. Ordinary and prudent engineer-
ing practices require much preliminary engineering work to be
completed before actual construction of the project is under-
taken, bids are let, and the contractor moves in. It would be
sheer folly to commence the actual excavation and construction
of the diversion works before completion of these prior steps
which is impossible within the 40 day statutory period follow-
ing posting of notice of appropriation.
DNR refers us to several cases from Montana and elsewhere
by way of analogy in support of its contention that commencement
of actual construction of the diversion works within the 40 day
statutory period is required. Solberg v. Sunburst Oil & Gas Co.,
(1925), 73 Mont. 94, 104, 235 P. 761, interprets the phrase
"commencing drilling operations" in an oil and gas lease to
" * * * denote unmistakably the first movement of the drill in
penetrating the ground. * * *I1 and work preliminary thereto did
not constitute compliance. State of Arizona v. U. S. Land
Company (1966), 3 Ariz.App. 167, 412 P.2d 736, involved inter-
pretation of the words "substantially commencedu in Arizona's
Water Code dealing with construction of ground water wells and
held that preliminary work was insufficient compliance. Rupp v.
Earl H. Cline & Sons, Inc. (1963), 230 Md. 573, 188 A.2d 146,
1 ALR3d 815, dealt with priorities under Maryland's mechanic's
lien laws after construction has commenced and held that "com-
mencement of a building" meant actual construction with a present
intention to continue the work until completion of the building.
North Shaker Boulevard Co. v. Harriman Nat. Bank, (1924) 22
Ohio App. 487, 153 N.E. 909, held that the digging of a test
hole was insufficient compliance with the statutory requirement
that "work, construction and improvements were begun" under
Ohio's mechanic's lien statute. Arkansas Power & Light Co. v.
Federal Power Com'n, (1942), 125 F.2d 982, held that a federal
power licensee who was required to commence actual construction
of a project within a specified period had not complied with the
terms of his license by excavating several thousand yards of
dirt, clearing, grading, surveying, and construction of a road
as this was simply preliminary work incidental to the actual
construction and not a part of actual construction.
We do not consider these attempted analogies in point
concerning interpretation of the Montana statute. They involve
entirely different statutory language under statutes whose pur-
pose is dissimilar from that of our statute. Under these cir-
cumstances, we fail to see how they aid in interpreting and con-
struing the meaning of our statutory language.
We hold therefore that the meaning of the words " * * *
proceed to prosecute the excavation or construction of the work
by which the water appropriated is to be diverted * * *" is not
confined to the commencement of actual on-site excavation or
construction of the diversion works, but that it encompasses
the steady on-going effort in good faith by Intake to prosecute
the construction of the project under the circumstances disclosed
here.
The final issue is whether equitable and public policy
- 21 -
considerations preclude Intake from claiming an inchoate right
to appropriate 80,650 acre feet per year of the waters of the
Yellowstone River.
The gist of DNR's argument on this issue, as we under-
stand it, is that the judgment here constitutes a judicial stamp
of approval of Intake's project for an indefinite or open-ended
term of years; that the judgment is contrary to the letter and
spirit of prior and existing water law of this state in that it
places in a state of limbo the rights of the people of Montana
and subsequent appropriators to the beneficial use of over
80,000 acre feet per year of the waters of the Yellowstone River;
that Intake's project is contrary to public policy and should not
be approved because of the substantial number of legal and prac-
tical hurdles that must be overcome to make this project a reality
which render it highly speculative, indefinite and uncertain
and further that the intended use of the water is contrary to the
purposes of the Yellowstone River Compact; and that the entry of
similar decrees in Colorado is not in point because Colorado stat-
utes authorizing conditional decrees with periodic judicial re-
view have no counterpart in Montana.
Intake's contentions, on the other hand, Arethat DNR's
concern over the effect of the judgment on the people of Montana
and subsequent appropriators is unwarranted because the amount
of the appropriation amounts to less than 1% of the mean annual
flow of the river at the point of diversion and there would be a
negligible effect on the river itself and subsequent appropriators
and in reality would benefit the people of Montana by putting a
small portion of the 8.8 million acre feet of surplus waters of
the Yellowstone River to beneficial use; that the validity of
Intake's appropriation is not in limbo for an indefinite and
open-ended term because Intake has an existing right from June 8,
1973 under General Ag. Corp. v. Moore, 166 Mont. 510, 534
P.2d 859; that while a number of legal and practical hurdles
exist before Intake's project can become a reality, such con-
siderations do not render the project so indefinite and specu-
lative as to strike down the project from the outset and pre-
clude Intake's efforts to complete it; that Intake is entitled
to litigate the constitutionality of the Yellowstone River
Compact; and that the Montana Declaratory Judgment Act furnishes
sufficient legal foundation for entry of the judgment here
without specific authorization for conditional water decrees as
in Colorado.
The direct answer to this issue is that there is nothing
illegal, inequitable, or contrary to public policy so as to
preclude Intake from claiming a right to appropriate 80,650 acre
feet of water per year of the waters of the Yellowstone River.
Intake has an existing right for the reasons and under the auth-
orities previously cited. While this existing right does not
constitute a valid and completed appropriation, it entitles
Intake to pursue its project with reasonable diligence to that
end for the reasons and under the statutes and case law here-
tofore discussed. The fact that final determination of the
validity of Intake's appropriation may be years away does not
place the rights of the people of Montana or subsequent appro-
priators in limbo for an indefinite and open ended term to any
greater extent here than in any other case involving a multi-
million dollar project of great magnitude and complexity which
is clearly not prohibited. Intake, as well as any other person
or business organization, has the right to litigate the consti-
tutionality of any law including Art. X of the Yellowstone River
Compact, section 39-846, R.C.M. 1947, and the applicability of
the Major Facility Siting Act. Considerations of equity and
public policy in no way preclude this. The Montana Declaratory
Judgment Act authorizes the instant action. It provides in
pertinent part in section 93-8902, R.C.M. 1947:
"Any person * * * whose rights, status or other
legal relations are affected by a statute * * *
may have determined any question of construction
or validity arising under the * * * statute * * *
and obtain a declaration of rights, status or
other legal relations thereunder."
It further provides in section 93-8912, R.C.M. 1947:
"This act is declared to be remedial; its pur-
pose is to settle and to afford relief from un-
certainty and insecurity with respect to rights,
status and other legal relations; and it is to
be liberally construed and administered."
Paragraphs numbered 1, 2 and 3 of the Judgment and Decree do this
precisely. They adjudicate Intake's rights and status in rela-
tion to its proposed project and activities to the date of trial
under Montana water appropriation statutes.
However, paragraphs numbered 4 and 5 of the Judgment and
Decree go considerably beyond this and must be stricken.
Paragraph 4 provide&:
"4. In the event it is ultimately and finally
determined in the action now pending in Lewis
and Clark County, Montana, Civil Docket No.
36907, or any appeal stemming therefrom, that
Intake is subject to and must comply with the
provisions of the Montana Major Facility Siting
Act of 1973, as amended, in the construction
of its diversion works on the Yellowstone River
in Dawson County, Montana, any actions taken by
Intake to comply with the provisions of the
Montana Major Facility Siting Act of 1973, as
amended, shall constitute prosecution of con-
struction of the work by which the water ap-
propriated June 8, 1973, is to be diverted, which,
if prosecuted with reasonable diligence to its
completion entitles Intake to relate back the
priority of its appropriation of the waters of
the Yellowstone River in Dawson County, Montana,
to the date of posting of the Notice of Water
Right Appropriation for Posting under Sections
89-811 and 89-812, R.C.M. 1947, to-wit: June 8,
1973. "
This provision purports to adjudicate Intake's rights and
status under a future hypothetical contingency that may or may not
occur. It does not require diligent prosecution of the action
to completion by Intake. It grants to Intake a "carte blanche"
for any actions it may take thereafter to comply, without defin-
ition or limitation, without regard to reasonableness, and
under unknown facts that may occur or circumstances that may
exist in the future. A determination of whether Intake, follow-
ing the date of this trial, has continued to prosecute its pro-
ject with reasonable diligence is a question of fact under the
authorities previously cited. That determination must be made
on the basis of known and proven facts at the time of trial, in
such context, and under the totality of facts and circumstances
then existing. It cannot and should not be adjudicated at this
time .
Paragraph 5 provides:
"5. Intake's appropriation of June 8, 1973, is
complete as of June 8, 1973 to the full amount of
water its facilities are capable of diverting
from the Yellowstone River, (but not exceeding
80,650 acre feet per year), for sale, rent or dis-
tribution for agricultural, industrial, municipal
and domestic purposes, (and for each of such
purposes), when its diversion works and off-stream
reservoir are completed, and Intake is ready and
willing to deliver water to users upon demand and
offers to do so."
The same comments apply to this paragraph. In addition,
the language of this paragraph can be interpreted as granting
Intake an accrued appropriation as of June 8, 1973 by use of
the word "is" rather than "will be". As previously discussed,
Intake simply possesses an uncompleted appropriation at this time.
What has been decided here today is that Intake has com-
plied with Montana water appropriation statutes to the date of
trial and upon completion of compliance with statutory require-
ments, Intake's "existing right" of priority of appropriation
will ripen into a completed appropriation as of June 8, 1973.
Whether future activities of Intake under hypothetical contingencies
and in the light of unknown future events qualifies must await
future determination. DNR, in its continuing administration
of Montana's water use laws, can monitor Intake's future activ-
ities and initiate action to terminate Intake's right of prior-
ity of appropriation at any time Intake ceases to prosecute its
project with reasonable diligence to completion and thereby
subject Intake to the provisions of Montana's Water Use Act
It has been held and we approve of the following state-
ment of the principles applicable under the Uniform Declaratory
Judgment Act:
"The courts have no jurisdiction to determine
matters purely speculative, enter anticipatory
judgments, declare social status, deal with
theoretical problems, give advisory opinions,
answer moot questions, adjudicate academic
matters, provide for contingencies which may
hereafter arise, or give abstract opinions.
(Citing cases.) 'The Uniform Declaratory Judg-
ment Act does not license litigants to fish in
judicial ponds for legal advice.'" Little v.
Wachovia Bank and Trust Company, 252 N.C. 229, 113
S.E. 2d 689. Also see Indiana Alcoholic Beverage
Commission v. Deets, 133 1nd.App. 444, 179 N.E.2d
217.
The judgment and decree of the district court is modified
by striking paragraphs numbered 4 and 5 therein. All conclusions
of law on which said paragraphs are based are stricken or modi-
fied in conformity with this opinion.
We have considered the peripheral arguments and conten-
tions of the parties and find it unnecessary to comment on them
in this opinion as none would alter our decision herein.
The judgment and decree of the district court as modified
is affirmed.
Justice
Chief Justice
Shanstrom, District
sitting in place of Mr.
Justice Wesley Castles.