Matter of Application for Beneficia

No. 95-080
IN THE SUPREME COURT OF THE STATE OF MONTANA
1996

IN THE MATTER OF THE APPLICATION FOR
BENEFICIAL WATER USE PERMIT
Nos. 63023-s76L, Rasmussen;
64988-g76L, Starner;
and
APPLICATION FOR CHANGE OF
APPROPRIATION WATER RIGHT
No. G15152-S761, Pope.

APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Dorothy McCarter, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Daniel F. Decker (argued), and John B. Carter,
Tribal Legal Department, Confederated Salish
and Kootenai Tribes, Pablo, Montana
James H. Goetz (argued), Goetz, Madden & Dunn,
Bozeman, Montana
For Respondent:
Hon. Joseph P. Mazurek, Attorney General,
Harley R. Harris (argued), Assistant Attorney
General, Helena, Montana
Tim D. Hall (argued) and Donald D. MacIntyre,
Special Assistant Attorneys General, Department

F 1r.:p tjtana
of Natural Resources and Conservation,

Submitted: December 14, 1995
Decided: August 22, 1996
Filed:

Cletk
Justice Terry N. Trieweiler delivered the opinion of the Court.

On April 30, 1985, the Confederated Salish and Kootenai Tribes

of the Flathead Reservation (Tribes) filed an objection with the
Montana Department of Natural Resources and Conservation (DNRC) to

an application by Frank Pope, a non-Indian landowner on the

reservation, for an authorization to change his point of diversion

and place of use of a portion of his on-reservation water right.

Between February 10, 1987, and September 16, 1987, the Tribes filed

objections with the DNRC to three applications from non-Indian

landowners on the reservation who were seeking permits for new

water rights from sources on the reservation. DNRC consolidated

the Tribes' objections to all of the water permit applications, and

on April 14, 1992, issued a final order in which it denied the

objections. On January 12, 1995, the District Court affirmed

DNRC's final order. The Tribes appeal the District Court's order.

We reverse the District Court.

On appeal we address only the issue of whether DNRC has

authority to grant new water use permits on the Flathead Indian
reservation prior to settlement or adjudication of the Tribes'
reserved water rights.
FACTUAL BACKGROUND
On October 5, 1984, Frank Pope, a non-Tribal member who owns

land in fee on the Flathead Indian Reservation, filed an

application with the Department of Natural Resources and

Conservation for a permit to change the point of diversion and

2
place of use of a portion of his existing water right. Between
August 19, 1986, and August 4, 1987, three other applicants, all of

whom are non-Tribal members who own land in fee on the reservation,

filed applications with DNRC to obtain permits for new water rights

from sources on the reservation. Following notice of each of these

applications, the Confederated Salish and Kootenai Tribes filed

objections and requested that the applications be denied in their

entirety.

In response to the Tribes' objections, DNRC appointed a

hearing examiner and set an initial hearing date for each of the

applicant's petitions. Subsequently, the Tribes moved to dismiss

one of the cases for lack of jurisdiction and requested that the

hearing examiner bifurcate the jurisdictional and substantive

issues. The Tribes contended that the merits of the individual

applications could not be decided until it was determined whether

DNRC has jurisdiction to engage in water rights proceedings on the

Flathead Reservation. On November 8, 1989, the hearing examiner

granted the Tribes' motion to bifurcate and certified the Tribes'

legal objections to DNRC's director pursuant to Rule 36.12.214,

ARM.

DNRC director Karen Barclay Fagg consolidated the Tribes'
objections to all of the applications. On April 30, 1990, Fagg

issued an order and memorandum in which she concluded that DNRC has

jurisdiction to regulate any surplus water on fee land on the

3
reservation even though Tribal reserved water rights have not yet
been quantified.

The consolidated cases were subsequently remanded to the

hearing examiner who issued individual "Proposals for Decision for

each of the Applications." The Tribes filed exceptions to the

hearing examiner's proposed decisions based on their contention

that DNRC does not have jurisdiction to regulate waters on the

reservation. The DNRC director then allowed a consolidated oral

argument on September 26, 1991, at which the Tribes were allowed to

present exceptions. On April 14, 1992, Fagg issued DNRC's final

order which affirmed its previous April 30, 1990, order and

clarified that it applied to "new permits for surplus, non-reserved

water, and to changes [to permits for] surplus, non-reserved water,

by non-Indians on fee lands within the exterior boundaries of the

Flathead Indian Reservation."

On May 15, 1992, the Tribes simultaneously filed a petition

for judicial review in the First Judicial District Court in Lewis

and Clark County and a complaint for declaratory and injunctive
relief in the United States District Court for the District of

Montana. On July 24, 1992, DNRC filed a motion in the First
Judicial District Court to affirm its final order regarding

jurisdiction.

After considering various motions by the parties, the District

Court held that the questions raised in the federal action should

be resolved before the state issues, and ordered the state action

4
stayed pending a decision from the federal court. The federal

court, however, ordered the federal action stayed until the state

issues were resolved and permitted the Tribes to reserve the

federal questions pending state court resolution. The federal

court expressly held that the Tribes had properly reserved the

federal claims for later review.

On January 12, 1995, the District Court, after considering

oral arguments from the parties, issued its decision and order

affirming DNRC' s jurisdiction. The court held that DNRC has

jurisdiction pursuant to the Water Use Act to issue new use permits

prior to formal adjudication of existing water rights or completion

of compact negotiations, that DNRC's jurisdiction to issue such

permits is not suspended by § 85-2-217, MCA, and that DNRC is not

collaterally estopped by the District Court's prior holding in United

States v. Department of Natural Resources and Conservation (1st Jud. Dist. Mont.

June 15, 1987), No. 50612.

DISCUSSION

On appeal we address only the issue of whether DNRC has
authority to grant new water use permits on the Flathead Indian

Reservation prior to settlement or adjudication of the Tribes'

water rights. 1 Because this issue is dispositive, we need not

lThe Tribes have challenged DNRC's jurisdiction to issue new
water use permits pursuant to § 85-2-311, MCA, and its authority to
authorize changes of existing appropriation rights pursuant to
§ 85-2-402, MCA. Because an applicant's burden of proof is
essentially the same under either statute, this Court will focus
its discussion on the requirements of § 85-2-311, MCA. Our

5
address the Tribes' additional contentions that (1) DNRC's

jurisdiction to issue water use permits on the reservation is

suspended during the pendency of the Tribes' negotiations with the

Montana Reserved Water Rights Compact Commission pursuant to

§ 85-2-217, MCA, and that (2) the DNRC is collaterally estopped by

the same District Court's prior decision in United States v. Department of

Natural Resources and Conservation (1st Jud. Dist. Mont. June 15, 1987),

No. 50612.

This case was bifurcated prior to the DNRC hearing and the

only issue decided has been whether DNRC has jurisdiction to engage

in water rights proceedings on the Flathead reservation. Because

this jurisdictional issue is purely legal, we review the District

Court's order to determine whether its interpretation of the law is

correct. Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. 459, 469,

898 P.2d 680, 686.

Title 85, Chapter 2, MCA (Montana Water Use Act) governs the

administration, control, and regulation of water rights within the

state of Montana. Section 85-2-101, MCA. Among other things, the
Act provides for the application and issuance of permits for the

appropriation of surface water. The requirements for the issuance

of water use permits are specifically set forth in § 85-2-311(1),
MCA, which provides that DNRC must issue a permit if an applicant

decision, however, applies equally to both § 85-2-311, MCA, and
§ 85-2-402, MCA.

6
proves by a preponderance of the evidence that all of the following

relevant criteria are met:

(a) there are unappropriated waters in the source
of supply at the proposed point of diversion;

(b) the water rights of a prior appropriator will
not be adversely affected;

(e) the proposed use will not interfere
unreasonably with other planned uses or developments for
which a permit has been issued or for which water has
been reserved

In this case, the Tribes maintain that given the undisputed

fact that they possess senior unquantified reserved water rights,

it is impossible for a water permit applicant to prove (1) that

there are unappropriated waters in the source of supply pursuant to

§ 85-2-311 (1) (a), MCA; (2) that the Tribes' rights as a prior

appropriator will not be adversely affected pursuant to

§ 85-2-311(1) (b), MCA; and (3) that the applicant's proposed use

will not interfere with the Tribes' planned uses for which water

has been reserved pursuant to § 85-2-311(1) (e), MCA. The Tribes

contend that until their reserved water rights have been quantified

by a compact negotiation pursuant to § 85-2-702, MCA, or by a

general inter sese water rights adjudication, an applicant cannot meet

his burden of proof pursuant to § 85-2-311, MCA, and DNRC will not
have jurisdiction to issue new water use permits on the

reservation.

The District Court's decision regarding DNRC' s jurisdiction to

issue water use permits on the reservation pursuant to

7
§ 85-2-311(1), MCA, discussed only the applicant's burden to meet

the requirements of subsections (a) and (b). Although the Tribes

contended that the existing water rights must first be adjudicated

and the Tribes' reserved water rights quantified before an

applicant could prove that there is unappropriated water available

for new use and that the rights of a prior appropriator would not

be adversely affected, DNRC maintained, and the District Court

agreed that "the applicant need only show that there is water

available at the proposed point of diversion, and thus not

appropriated, giving the applicant potential, adjudicable water

rights to the surplus water."

The District Court's decision rested, in part, on its

determination that "appropriated waters" do not include Indian

reserved water rights, and therefore, that the Tribes are not

"prior appropriators," as contemplated by § 85-2-311 (1) (a) and (b) .

In its decision and order, the court specifically held that:

Section 85-2-102(1), MCA, defines "appropriate" as
to "divert, impound, or withdraw (including by stock for
stock water) a quantity of water "Section
85-2-301, MCA, provides that a person may not appropriate
water except as provided in chapter 2 of the Water Use
Act. Section 85-2-302, MCA, states that "[e] xcept as
otherwise provided in (1) through (3) of 85-2-306, a
person may not appropriate water . . . except by applying
for and receiving a permit from the department." Section
85-2-311, MCA, sets forth the criteria for issuance of a
permit. Subsection (6) provides that any appropriation
contrary to the provision of the section is invalid.

Clearly. the language of these sections leads one to
conclude that appropriated water is water that has been
allocated by the permit process provided in that chapter.

8
 "

and the amount of water used should reflect the amount
allocated by permit.

This conclusion addresses the Tribes' contention
that an applicant cannot prove the availability of
unappropriated water unless the water supply has been
quantified. The statutory scheme does not require it.

(Emphasis added.)

This Court has long recognized a distinction between state

appropriative water rights and Indian reserved water rights. In

State ex rei. Greely v. Confederated Salish and Kootenai Tribes of the Flathead Reservation

(1985), 219 Mont. 76, 89-90, 712 P.2d 754, 762, we noted that:

State appropriative water rights and Indian reserved
water rights differ in origin and definition. State-
created water rights are defined and governed by state
law. Indian reserved water rights are created or
recognized by federal treaty, federal statutes or
executive order and are governed by federal law.

Appropriative rights are based on actual use.
Appropriation for beneficial use is governed by state
law. Reserved water rights are established by reference
to the purposes of the reservation rather than to actual,
present use of the water.

(Citations omitted.)
We also distinguished reserved rights on the basis that they
need not be diverted from the stream when we observed that:
The right to water reserved to preserve tribal
hunting and fishing rights is unusual in that it is
non-consumptive. A reserved right for hunting and
fishing purposes "consists of the right to prevent other
appropriators from depleting the stream waters below a
protected level in any area where the non-consumptive
right applies" [United States v.] Adair [(9th Cir. 1983)], 723
F . 2 d [ 13 94 ,] 1411 [cert. denied, 104 U. S. 3 53 6 ( 1984 ) ] .

9
 I,

The Supreme Court has also held that under the
implied-reservation-of-water-rightsdoctrine, Indians are
entitled to sufficient water "to develop, preserve,
produce or sustain food and other resources of the
reservation, to make it livable." Arizona v. California
[(1963)], 373 U.S. [546,] 599-600. "[I]ndian treaty
rights to a natural resource that once was thoroughly and
exclusively exploited by the Indians secured so much as,
but no more than, is necessary to provide the Indians
with a livelihood--that is to say, a moderate living."
Washingtonv.FishingVesseIAss'n [(1979)],443 U.S. [658,] 686.

The Winters Court held that reserved water on the Fort
Belknap Reservation could be beneficially used for "acts
of civilization" as well as for agricultural purposes.
Winters v. [ United States ( 19 0 8) ], 2 0 7 U. S . [ 564 ,] 576. I t may
be that such "acts of civilization" will include
consumptive uses for industrial purposes. We have not
found decisive federal cases on the extent of Indian
water rights for uses classed as "acts of civilization."

It is clear, however, that Indian reserved water
rights may include future uses. Arizonav. California, 373 U.S.
at 6 0 0 - 0 1 , 83 S. Ct. at 14 9 8 i United States v. Ahtanum Irrigation
District (9th Cir. 1964),330 F.2d 897,914. Most
reservations have used only a fraction of their reserved
water. National Water Commission, Water Policies for the Future
51- 61 (1973). However, reserved rights may reflect
future need as well as present use. For example, the
"practically irrigable acreage" standard applies to
future irrigation or reservation land, not present
irrigation practices and current consumptive uses.

Greely, 219 Mont. at 93-94, 712 P.2d at 764-65.

In addition, the Montana Water Use Act, as amended in 1985,
reflects the distinction between federal and Indian reserved water

rights and state-created appropriative rights. See, e.g., § 85-2-224,

MCA (statement of claim for federal reserved water rights) i

§ 85-2-234 (2), MCA (terms of negotiated Indian water rights compact

must be included in final decree without alteration) i § 85-2-

234 (3), MCA (final decree must establish existing rights and

10
priorities of Indian tribe possessing water rights arising under

federal law); and §§ 85 -2 -701 through -705, MCA (establishing

reserved water rights compact commission to negotiate with Indian

tribes to quantify Indian reserved water rights) .

Therefore, an applicant's proof in satisfaction of

§ 85-2-311(1) (a) and (b), MCA, does not satisfy the requirement of

§ 85-2-311 (1) (e), MCA, that his "proposed use will not interfere

unreasonably with other planned uses or developments for which a

permit has been issued or for which water has been reserved."

Because of the nature of Indian reserved water rights and

because of the fact that the Tribes' rights have not yet been

quantified, the Tribes contend that an applicant cannot meet this

statutory burden and that DNRC cannot issue a permit consistent

with the Montana Water Use Act's statutory scheme.

Although the argument was neither made in the District Court

nor in its brief on appeal, DNRC asserted during oral argument,

without citation to authority, that § 85-2-311(1) (e), MCA, does not

pertain to Indian reserved water rights, but only to those rights
reserved by the state or the United States pursuant to § 85-2-316,
MCA. However, there is no basis from the plain language of

§ 85-2-311, MCA, for making that distinction. Furthermore, were we

to construe § -311 to exclude Indian reserved rights as opposed to

all others, we would be ignoring the admonition in Greely which

served as the very premise for our conclusion that the Montana

11
Water Use Act was adequate on its face to adjudicate Indian

reserved water rights. There we stated:

We presume that the Water Court will not apply these code
sections in an improper manner to the claimants of Indian
reserved water rights. Federal Indian law must be
applied in these areas as well.

In a similar manner, it may be contended that
Section 85-2-316, MCA, which limits the reservation of
future uses to certain river basins, sets forth an
improper limitation on Indian reserved rights. We also
presume that the Water Court will not apply these
statutes without regard to controlling federal law on
Indian water rights.

We recognize that the Water Use Act of Montana does
not explicitly state that the Water Court shall apply
federal law in adjudicating Indian reserved rights.
However, we conclude that is not fatal to the adequacy of
the Act on its face. We hold that state courts are
required to follow federal law with regard to those water
rights.

Greely, 219 Mont. at 94-95, 712 P.2d at 765-66.

DNRC further maintains that even if § 85-2-311(1) (e), MCA,

does contemplate Indian reserved water rights, an applicant for a

water use permit may still, prior to quantification of the Tribes'

reserved rights, prove that his proposed use will not interfere
wi th those rights. DNRC contends that, because any new water
rights permits it issues are subordinate to the senior rights of
the Tribes, the Tribes would not be prejudiced by the issuance of

such permits.

It is undisputed that the Confederated Salish and Kootenai

Tribes possess reserved water rights. Winters v. United States (1908), 207

12
U . S . 564; Greely, 219 Mont. 76 , 712 P. 2 d 754. The Tribes and the

State of Montana are presently involved in formal compact

negotiations to quantify the Tribes' reserved rights on the

reservation pursuant to §§ 85-2-701 through -705, MCA. Until the

formal negotiations are resolved, however, the extent of the

Tribes' reserved water rights remains unknown. Although it is

likely that the Tribes' rights are pervasive, reserved water rights

are difficult to quantify. See United States v. Alexander (9th Cir. 1942),

131 F.2d 359, 360 (stating that "The [Hellgate] treaty impliedly

reserved all waters on the [Flathead] reservation to the Indians") ;

Greely, 219 Mont. at 92, 712 P. 2d at 764 (stating that" Winters [Indian

reserved water] rights are difficult to quantify"). It is

well-established, however, that Indian reserved rights incorporate

both consumptive and non-consumptive uses, both implicit and

explicit uses, and both present and future uses for reservation

purposes. Greely, 219 Mont. at 93, 94, 98, 712 P.2d at 764, 765,

768. In addition, the Tribes' reserved water rights will

presumably include water for agricultural purposes, water for
tribal hunting and fishing, and water for "acts of civilization."

Greely, 219 Mont. at 92-93, 712 P.2d at 764-65. Water for

agricultural purposes includes enough water to "irrigate all the

practically irrigable acreage on the reservation." Greely, 219 Mont.

at 92, 712 P.2d at 674 (quoting Arizonav. California (1963), 373 U.S.

546, 600). Non-consumptive water use for tribal hunting and

13
fishing rights "consists of the right to prevent other

appropriators from depleting the stream waters below a protected

level in any area where the non-consumptive right applies." Greely,

219 Mont. at 93, 712 P. 2d at 764 (quoting United States v. Adair (9th Cir.

1983), 723 F.2d 1394, 1411). See also Joint Bd. of Control v. United States

(9th Cir. 1987), 832 F.2d 1127, 1131-32, cert. denied (1988), 486 U.S.

1007 (stating that the Tribes' aboriginal fishing rights secured by

treaty include the right to maintain instream flows and reservoir

pools at levels designed to protect tribal fisheries, regardless of

the effect on junior claimants to reservation waters). Water for

"acts of civilization," includes water to "develop, preserve,

produce or sustain food and other resources of the reservation, to

make it liveable," and may also include consumptive uses for

industrial purposes. Greery, 219 Mont. at 93, 712 P.2d at 764, 765

(quoting Arizonav. California (1963), 373 U.S. 546, 599-600).

Although the scope and extent of the Tribes' reserved water

rights have not been resolved and are not at issue in this case,

the elusive nature of Indian reserved water rights underscores both
the difficulty of quantifying those rights and the difficulty a

water permit applicant would have proving that his proposed use
will not interfere with those rights. Clearly the only way to

determine if an applicant's use will unreasonably interfere with

the Tribes' reserved water rights is to decide how much water is

reserved and how much water is available. The Tribes maintain that

14
such a determination obviously requires quantification of their

reserved water rights. DNRC maintains, however, that "the DNRC

process rarely requires that the ultimate scope of an existing

right be known." According to DNRC, § 85-2-313, MCA, which

provides that a permit is provisional and subject to a final

determination of existing water rights, is intended to permit the

issuance of water use permits prior to the adjudication of existing

rights.

Nothing in that section, however, relieves an applicant of his

burden to meet the statutory requirements of § 85-2-311, MCA,

before DNRC may issue that provisional permit. Instead of

resolving doubts in favor of appropriation, the Montana Water Use

Act requires an applicant to make explicit statutory showings that

there are unappropriated waters in the source of supply, that the

water rights of a prior appropriator will not be adversely

affected, and that the proposed use will not unreasonably interfere

with a planned use for which water has been reserved. Section

85-2-311, MCA. As we stated, the latter requirement is critical to

our conclusion in Greery that the Act must be applied consistently

with federal Indian law.

A reading of the Water Use Act which did not recognize the
clear mandates of § 85-2-311, MeA, would promote the uncontrolled

development of a valuable natural resource which, as we recognized

in Montana Power Co. v. Carey (1984), 211 Mont. 91, 96, 685 P.2d 336, 339,

would "contradict [] the spirit and purpose underlying the Water Use

Act."

15
 '.

The Montana Water Use Act, our prior decision in Greely, and the

decisions of the federal courts make it clear that an applicant for

a permit to use water within the exterior boundaries of the

Flathead Reservation must prove that his proposed use does not

unreasonably interfere with the Tribes' reserved water rights. We

hold that given the nature of Indian reserved water rights such a

showing cannot be made until the Tribes' rights are quantified by

a compact negotiation pursuant to § 85-2-702, MCA, or by a general

~~r~~ water rights adjudication. Because an applicant's burden

of proof pursuant to § 85-2-311(1) (e), MCA, may not be satisfied

until the Tribes' reserved water rights are quantified, we further

hold that DNRC does not have authority to grant water use permits

on the reservation until that quantification is complete.

Accordingly, we reverse the order of the District Court which

held that DNRC has jurisdiction pursuant to the Water Use Act to

issue new use permits prior to formal adjudication of the Tribes'

reserved water rights or completion of compact negotiations.

16
We concur:

Chief Justice

Justices

17
Justice James C. Nelson specially concurs.

I concur with the analysis and result of our decision and

have, accordingly, signed the opinion. In doing so, I,

nevertheless, question the necessity for our taking this approach,

given the fact that in 1987, DNRC unsuccessfully litigated the

exact issues that are now before us in the same District Court.

Under such circumstances, the doctrine of collateral estoppel

should, and in my view, does preclude DNRC from relitigating those

very same issues again here.

The doctrine of collateral estoppel or issue preclusion bars

a party against whom the claim is asserted from relitigating an

issue that the party previously litigated. Peschel v. Jones

(1988), 232 Mont. 516, 521, 760 P.2d 51, 54. The bar extends to

all questions essential to the judgment which were determined by a

prior judgment. Haines Pipeline Const. v. Montana Power (1994),

265 Mont. 282, 288, 876 P.2d 632, 636. Collateral estoppel refers

to a preclusion of issues and is distinct from res judicata which

refers to a preclusion of claims. Peschel, 760 P.2d at 54; see

also Boyd v. First Interstate Bank (1992), 253 Mont. 214, 218, 833

P.2d 149, 151.

We apply a three-prong test to determine whether collateral

estoppel applies in a given case:

1) Was the issue decided in the prior adjudication
identical with the one presented in the act ion in
question?

2) Was there a final judgment on the merits?

18
 3) Was the party against whom the plea is asserted a
party or in privity with a party to the prior
adjudication?

Peschel, 760 P.2d at 54 (quoting Aetna Life Ins. Co. v. McElvain

(1986), 221 Mont. 138, 146, 717 P.2d 1081, 1086). This Court has

further held that upon an affirmative answer to all three
questions, collateral estoppel bars litigation regarding an issue

in trial which was previously litigated in either a civil or

criminal trial. Peschel, 760 P.2d at 54.

The Tribes contend that the issue of DNRC's authority to grant

new water use permits on the Flathead Indian Reservation prior to

settlement or adjudication of the Tribes' reserved water rights has

been previously litigated in a civil trial in Montana district

court. On June 15, 1987, the Montana First Judicial District

Court, the Honorable Gordon R. Bennett (now retired), presiding,

entered its opinion and order reversing DNRC's final decision to

issue a provisional permit to appropriate water to Don Brown and

Jerry Wallem. See United States and Montana Power Co. v.

Department of Natural Resources (Don Brown) (D. Mont. June 15,

1987), No. 50612. Specifically, the court construed § 85-2-311,
MCA, and held that DNRC did not have the authority to issue a
permit for a new water application when questions of senior
conflicting claims had been raised.
In Don Brown, a junior claimant sought a permit for a new

water appropriation. The Montana Power Company and the United

States Bureau of Reclamation timely objected on the grounds that

there were no unappropriated waters available and that their rights

19
as prior appropriators would be adversely affected by DNRC' s

granting a new permit. DNRC contended, as it did in the instant

case, that the permits would not adversely affect the rights of the

prior appropriators. The court stated that there is:

only one way to determine if an unappropriated water
right exists in a source of supply: decide how much water
is available and how much of it has been appropriated.
This obviously requlres quantification of existing
rights. There is, likewise, only one way to determine
whether the water rights of prior appropriators will be
adversely affected by additional appropriation. You must
begin by determining what the water rights of the prior
appropriators are. In either case, the need to determine
existing water rights is inescapable and authority to
make such a determination is, and has been since 1973,
exclusively in the district or water courts.

The court, therefore, found that DNRC did not have the authority to

issue the permits under § 85-2-311, MCA, because without a

quantification of existing water rights, DNRC was unable to

determine if the applicant met the criteria set forth in § 85-2-

311, MCA, requiring the applicant to show that there were

unappropriated waters in the source of supply and that the water

rights of prior appropriators would not be adversely affected. The

parties to Don Brown, including DNRC, reached a stipulation and did

not appeal the district court's findings in its order and opinion.
Therefore, the judgment of the district court is final and subject

to the doctrine of collateral estoppel.

DNRC argues that the doctrine of collateral estoppel does not

apply in the instant case because the issues raised by the Tribes

do not meet the first prong of the test. Specifically, DNRC

contends that the issues decided in the Don Brown case are not

identical to those presented in the instant case because the

20
Montana Legislature made significant changes to § 85-2-311, MCA, in

1989. I disagree. In Don Brown, the district court construed the

1985 version of § 85-2-311, MCA, which provided:

(1) Except as provided in subsections (2) through (4),
the department shall issue a permit if the applicant
proves by substantial credible evidence that the
following criteria are met:
(a) there are unappropriated waters in the source of
the supply .
(b) the water rights of a prior appropriator will
not be adversely affected;
(e) the proposed use will not interfere unreasonably
with other planned uses or developments for which a
permit has been issued or for which water has been
reserved.

Section 85-2-311, MCA (1985). Section 85-2-311, MCA (1993), the

statute applicable to the instant case provides:

(1) Except as provided in subsections (3) and (4), the
department shall issue a permit if the applicant proves
by a preponderance of the evidence that the following
criteria are met:
(a) there are unappropriated waters in the source of
supply at the proposed point of diversion .
(b) the water rights of a prior appropriator will
not be adversely affected .
(e) the proposed use will not interfere unreasonably
with other planned uses or developments for which a
permit has been issued or for which water has been
reserved;

[Emphasis added to illustrate changes from the 1985 statute.] In
1989 and 1993, the legislature amended § 85-2-311, MeA, to require

a preponderance of the evidence standard of proof rather than a

substantial credible evidence standard and to qualify the source of
supply. However, the legislature did not make such substantial

amendments to § 85-2-311, MCA, so as to alter the issues discussed

by the District Court construing these statutory provisions. In

fact, the issues decided in the Don Brown case are identical to

21
those presented in the action in question and meet the first prong

of the collateral estoppel inquiry.

Moreover, the opinion and order issued by the court in Don

Brown qualifies as a final judgment on the merits and therefore

meets the second prong of the collateral estoppel inquiry.

Finally, DNRC was both a party in the Don Brown adjudication and a

party in the instant case and thereby satisfies the third prong of

the collateral estoppel inquiry. Thus, in this case, each prong of

the three part test is satisfied.

In Don Brown, the district court already adjudicated and

decided issues identical to the ones presented to this Court in the

instant case. The doctrine of collateral estoppel renders that

court1s decision dispositive. Accordingly, while I agree with the

analysis and result of our opinion, the First Judicial District

Court had resolved the issues in a final judgment rendering

relitigation of the very same issues unnecessary. Under such

circumstances, our decision here should not come as

surprise.

-

22
Justice W. william Leaphart, specially concurring.

I concur in the result reached by the Court. However, while
the Court has concluded that the applicants have failed to satisfy
the Montana Water Use Act, specifically, § 85-3-211, MCA, I would
hold that under the principles of tribal sovereignty, the state has
no jurisdiction to issue water permits on the Flathead Reservation.
Montana has no jurisdiction and no regulatory authority over tribal
waters until tribal sovereignty has been waived pursuant to the
McCarran Amendment, 43 U.S.C. § 666. In the absence of state
jurisdiction to regulate or administer tribal water, compliance
with the Water Use Act is immaterial.
In the administrative hearing on the Tribes' motion to dismiss
for lack of jurisdiction before the Department of Natural Resources
and Conservation (DNRC), the Tribes initially argued lack of state
jurisdiction based, in part, on the McCarran Amendment. In
appealing DNRC's final order and simultaneously filing a complaint
for relief in the United States District Court for the District of
Montana, the Tribes reserved the federal questions, including the
jurisdictional issue raised by the McCarran Amendment, for the

23
federal courtl. For purposes of "informing" this Court, the Tribes

set forth the McCarran Amendment jurisdictional issue as follows:

The reach of the McCarran Amendment' s waiver of sovereign
immunity, however, extends only to state processes
involving a general stream adjudication. See Dugan v.
Rank, 372 U. S. 609 (1963). Obviously the present
procedure, by which the DNRC proposes administratively to
grant individual new water rights on a case-by-case basis
does not fall within the McCarran Amendment's waiver.

Having raised the specter of lack of state regulatory

jurisdiction, the Tribes nonetheless contend that the

jurisdictional issue has been reserved for resolution in the

federal district court and that the only issue before this Court is

the interpretation of Montana statutes. The Tribes, however,

1 The federal district court granted the Tribes an England
reservation thereby allowing the Tribes to litigate their state
claims in state court and then return to federal court to litigate
the question of whether they are constitutionally exempt from the
Montana Water Use Act. England v. Louisiana State Bd. of Medical
Examiners (1964), 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440. In
affirming that reservation, the Ninth Circuit held that the intent
of such an England reservation is to allow the federal court to
await the state court litigation and then, if necessary, decide the
federal claims "in light of the state court's rulings."
Confederated Salish v. Simonich (9th Cir. 1994), 29 F.3d 1398,
1406. The federal courts, however, have failed to reckon with the
fact that the federal question (whether the tribes are constitu-
tionally exempt from the Montana Water Use Act) presents a
threshold question of jurisdiction; i.e., whether the state of
Montana has any jurisdiction to apply its Water Use Act in the
first instance. That fundamental question of state jurisdiction
must be addressed first. The state courts cannot proceed to
interpret the Water Use Act vis a vis the tribal rights unless it
is first determined that the state of Montana has jurisdiction to
apply the Act to tribal waters. Secondly, the state's
interpretation of the Water Use Act will shed no "light" on the
resolution of the issue which has been reserved for federal court.
That is, whether the tribes, through their sovereignty, are exempt
from the Act. It is the state court which should be awaiting
resolution of the jurisdictional question in federal court, not
vice versa.

24
cannot run with the hare and hold with the hounds on the question
of jurisdiction. JOHN LYLY, EUPHUS (1579). Regardless of whether the
parties seek to have us resolve the question of jurisdiction, we
must do so. In re Marriage of Miller (1993), 259 Mont. 424, 426-
27, 856 P.2d 1378, 1380. We cannot address the question of whether
the applicants can comply with the requirements of the Water Use
Act without making a threshold determination that the state had
jurisdiction to apply the Water Use Act to the tribal waters in the
first instance.
Indian reserved water rights are creatures of federal law and
as such their existence and application are independent of state
laws. Winters v. United States (1908), 207 U.S. 564, 28 S.Ct. 207,
52 L.Ed. 340. By virtue of their federal origin, Indian reserved
water rights preempt any rights determined by state forums. Water
use on a federal or Indian reservation is not subject to state
regulation absent explicit federal recognition of state authority
to do so. Federal Power Commission v. Oregon (1955), 349 U.S. 435,
75 S.Ct. 832, 99 L.Ed. 1215; Colville Confederated Tribes v. Walton
(9th Cir. 1981), 647 F.2d 42, 52, cert. denied 454 U.S. 1092. Such
recognition of state authority can be found in the McCarran
Amendment, enacted in 1952, which allows joinder of the United
States in state court adjudications of water rights, and
subsequently in the states' administration of such water rights, in
river systems where the government owns rights. 43 U.S.C. § 666.
The McCarran Amendment provides that:
Consent is hereby given to join the United States as
a defendant in any suit (1) for the adjudication of
25
 rights to the use of water of a river system or other
source, or (2) for the administration of such rights,
where it appears that the United States is the owner of
or is in the process of acquiring water rights by
appropriation under State law, by purchase, by exchange,
or otherwise, and the United States is a necessary party
to such suit.

The United States Supreme Court has concluded that the McCarran

Amendment includes Indian reserved water rights, thus, the states

have jurisdiction to adjudicate Indian water rights. Colorado

River Water Conservation Dist. v. United States (1976), 424 U.S.

800, 809-10, 96 S.Ct. 1236, 1242, 47 L.Ed.2d 483, 493-94. The suit

at issue in Colorado River was part of Colorado's ongoing

comprehensive water adjudication. The Court was persuaded by the

policy evinced in the McCarran Amendment that piecemeal

adjudication of water rights in a river system should be avoided.

Colorado River, 424 U.S. at 819.

The consent to jurisdiction given by the McCarran
Amendment bespeaks a policy that recognizes the
availability of comprehensive state systems for
adjudication of water rights as the means for achieving
these goals.

Colorado River, 424 U.S. at 819.

In a sequel to Colorado River, the United States Supreme Court
restated the important federal interest in allowing all water
rights on a river system to be adjudicated in a single

comprehensive state proceeding rather than piecemeal litigation.
Arizona v. San Carlos Apache Tribe (1983), 463 U.S. 545, 551, 103

S.Ct. 3201, 3205, 77 L.Ed.2d 837, 846.

The McCarran Amendment, as interpreted in Colorado
River, allows and encourages state courts to undertake
the task of quantifying Indian water rights in the course
of comprehensive water adjudications. Although

26
 adjudication of those rights in federal court instead
might in the abstract be practical, and even wise, it
will be neither practical nor wise as long as it creates
the possibility of duplicative litigation, tension and
controversy between the federal and state forums, hurried
and pressured decisionmaking, and confusion over the
disposition of property rights.

San Carlos Apache, 463 U.S. at 569 (emphasis added). However, the

Court added a caveat to the state courts' adjudication of Indian

water rights.

[O]ur decision in no way changes the substantive law by
which Indian rights in state water adjudications must be
judged. State courts, as much as federal courts, have a
solemn obligation to follow federal law. Moreover, any
state-court decision alleged to abridge Indian water
rights protected by federal law can expect to receive, if
brought for review before this Court, a particularized
and exacting scrutiny commensurate with the powerful
federal interest in safeguarding those rights from state
encroachment.

San Carlos Apache, 463 U.S. at 571. Thus, in these and other

cases, federal and state courts have clearly established that

states may join the United States and Indian tribes in

comprehensive water rights adjudications that include all claimants

along a river. See United States v. District Court in & for Water

Div. NO.5 (1971), 401 U.S. 527, 91 S.Ct. 1003, 281 L.Ed.2d 284;

United States v. District Court for Eagle County (1970), 401 U.S.
520, 91 S.Ct. 998, 28 L.Ed.2d 278; Dugan v. Rank (1963), 372 U.S.

609, 83 S.Ct. 999, 10 L.Ed.2d 15; In re Snake River Basin Water
System (Idaho 1988), 764 P. 2d 78, cert. denied 490 U. S. 1005

(1989); Elephant Butte Irrigation v. Regents of New Mexico (N.M.

App. 1993), 849 P.2d 372, 375-80.

In Colville Confederated Tribes, the Ninth Circuit Court of

Appeals addressed the question of when states may exert

27
jurisdiction over water on an Indian reservation. Colville

Confederated Tribes, 647 F.2d 42. The court held that state water

laws are not controlling on an Indian reservation. Colville
Confederated Tribes, 647 F.2d at 53. Especially applicable in the

instant case, the court quoted United States v. McIntire (9th Cir.

1939), 101 F.2d 650, 654:

[T] he Montana statutes regarding water rights are not
applicable, because Congress at no time has made such
statutes controlling in the Reservation. In fact, the
Montana enabling act specifically provided that Indian
lands within the limits of the state, "shall remain under
the absolute jurisdiction and control of the Congress of
the United States."

Colville Confederated Tribes, 647 F.2d at 53. The court also noted

that it did not perceive the McCarran Amendment as expanding the

state's regulatory powers over water on a federal reservation.

Later, in United States v. Anderson, the Ninth Circuit

revisited the issue of state authority to regulate water on Indian

reservations. United States v. Anderson (9th Cir. 1984), 736 F.2d

1358. In Anderson, the court held that because the Indian reserved

water rights in question had been quantified and were under the

protection of a federal water master, the state of Washington could
exercise its regulatory jurisdiction over the use of surplus, non-

reserved Chamokane Basin waters by non-members on non-Indian fee

lands within the Spokane Reservation. Anderson, 736 F.2d at 1366.

Central to the Ninth Circuit's decision was the fact that:

[T] he interest of the state in exercising its
jurisdiction will not infringe on the tribal right to
self-government nor impact on the Tribe's economic
welfare because those rights have been quantified and
will be protected by the federal water master.

28
Anderson, 736 F.2d at 1366.
A year later, the Ninth Circuit restated the proposition that
the McCarran Amendment waives immunity only after a general
adjudication of stream water rights has been made. South Delta
Water Agency v. United States (9th Cir. 1985), 767 F.2d 531, 541.
Determining that a court cannot adjudicate the administration of
water rights until it determines what those rights are, the court
held that:
Because there has been no prior adjudication of
relative general stream water rights in this case, there
can be no suit "for the administration of such rights"
within the meaning of the McCarran Amendment.
South Delta, 767 F.2d at 541. Consequently, as the Tribes argue,
albeit equivocally, a general stream adjudication, under subsection
(1), must precede administration of federal or Indian water rights
under subsection (2) of the McCarran Amendment. South Delta, 767
F.2d at 541.
In the instant case, DNRC's issuance of new water permits to
non-Indians on the Flathead Reservation was not part of a general
stream adjudication. See Dugan, 372 U.S. at 618. Thus, as the
Tribes point out "the present procedure, by which the DNRC proposes
administratively to grant individual new water rights on a case-by-
case basis does not fall within the McCarran Amendment's waiver."
In passing the Indian and Federal Water Rights Act, §§ 85-2-
701 through -705, MCA, the Montana Legislature recognized the
unique status of Indian reserved water rights within the state
adjudication system. The Act allows Montana Tribes and the Montana
Reserved Water Rights Compact Commission to negotiate a resolution
29
of Indian claims rather than enter into a full McCarran inter sese

adjudication. The Tribes' negotiations with the Montana Reserved

Water Rights Compact Commission are ongoing and not yet complete.

Accordingly, pursuant to § 85-2-217, MCA, "all proceedings to

generally adjudicate reserved Indian water rights and federal

reserved water rights of those Tribes and federal agencies which

are negotiating are suspended." Until the senior tribal water

rights have been identified and quantified through negotiation or

adjudication, excess or surplus waters that could subsequently be

available for appropriation under the Water Use Act, are

unidentifiable and unquantifiable. Thus, until the compact

negotiations conclude, DNRC cannot, under the McCarran Amendment,

administer water permits for those drainages that are affected by

reserved Indian water rights.
Consequently, in the absence of a completed adjudication or

negotiation of Indian water rights, the McCarran Amendment's waiver

of tribal sovereign immunity for the purposes of "administering"

those rights is not triggered. Until there has been a

quantification of tribal water rights, DNRC does not have
jurisdiction under the McCarran Amendment to "administer" any
excess waters through issuing permits--even if those permits are
provisional and subject to future adjudication. See § 85-2-313,

MCA.

Accordingly, I concur in the Court's conclusion that DNRC

cannot grant a permit to use water on the Flathead Reservation

until the Tribes' water rights are first adjudicated and

30
quantified. However, while the Court bases its decision on the

applicants' failure to satisfy the Water Use Act, § 85-2-311 (1) (e) ,

MCA, I conclude that the Montana Water Use Act does not come into

play unless, pursuant to the jurisdictional prerequisites of the

McCarran Amendment, the Tribes' sovereignty is waived. That is,

until there has been a completed adjudication or negotiation of

Indian water rights, the state of Montana has no ability to

quantify those rights and no jurisdiction to administer potentially

surplus waters through the issuing of permits, provisional or

otherwise.

Justice

31
• <

Chief Justice J. A. Turnage, dissenting.

I concur in the majority's starting premise that the Tribes

possess a reserved water right which is unique and which has not

yet been quantified. However, I must dissent from the majority's

conclusion that, under Montana statutes, this right of the Tribes

requires a shutdown of the water permitting process ln Montana.

Section 85-2-217, MCA, provides that adjudication of Indian

reserved water rights and federal reserved water rights shall be

suspended during negotiations for the conclusion of a water

compact. That provision recognizes the critical importance of the

compacting process in determining reserved water rights in Montana,

and guarantees that adjudication will accommodate the compacting

process. Unquestionably, the best solution to federal reserved

water rights is through compact negotiations.

The grant of a water use permit is not an adjudication of

water rights, however. Under § 85-2-313, MCA, the DNRC's granting

of a provisional water permit is not a final determination of water

rights. Granting a water use permit under § 85-2-311, MCA, cannot
deprive any Tribe of its prior rights, due to the provisional

nature of the permits.
The majority opinion will result in a shutdown of not only

water right adjudication, but also the preliminary decree process

throughout the state, until the compacting process is completed.

Counsel for the Tribes admitted as much at oral argument. Although

the Tribes have argued that this decision applies only to the

32
1. ~

Flathead Indian Reservation, there is hardly a watershed in Montana

which is not impacted by water rights of one or more of the seven

Indian reservations located within the state's boundaries. As the

District Court noted, this result entirely defeats the purpose of

the permit process, denying landowners after 1973 the right to any

new water use or change of use until the adjudication process is

completed.

The majority relies upon § 85-2-311 (1), MCA, to reach its

conclusion that DNRC does not have jurisdiction to issue new use

permits prior to quantification of the Tribes' reserved water

rights by adj udication or compact negotiations. That statute

provides, in relevant part:

[T]he department shall issue a permit if the applicant
proves by a preponderance of evidence that the following
criteria are met:
(a) there are unappropriated waters in the source
of supply at the proposed point of diversion:

(b) the water rights of a prior appropriator will not be
adversely affected;

(e) the proposed use will not interfere
unreasonably with other planned uses or developments for
which a permit has been issued or for which water has
been reserved [ . ]

The majority concludes that subsection (1) (e) above requires proof

that the proposed use will not interfere with Indian reserved water

rights. Because Indian reserved water rights have not yet been

quantified, the majority reasons, such proof is impossible.

DNRC has explained, however, that the language "other planned

uses or developments for which a permit has been issued or for

which water has been reserved" in subsection (1) (e) refers to § 85-

33
l· ...

2-316, MeA, "Reservation of waters."

The state or any political subdivision or agency of the
state or the United States or any agency of the United
States may apply to the department to reserve waters for
existing or future beneficial uses or to maintain a
minimum flow, level, or quality of water throughout the
year or at periods or for a length of time that the
department designates.

Section 85-2-316 (1), MeA. The statute goes on to provide an

extensive description of the process and procedure for obtaining a

reservation of water, including the basins in which water may be

reserved, the procedure for processing applications and granting

reservations, limitations on reservations, the priority of

appropriation of a water reservation, and transfers of

reservations.

The reference in § 85-2-311 (1) (e), MeA, to "other planned uses

or developments for which a permit has been issued or for which

water has been reserved" relates logically and naturally to the

extensive statutory scheme a few sections thereafter for

reservation of waters. It relates considerably less logically or

naturally to the reserved water rights of Indian tribes, in

connection with which the language "for which a permit has been

issued" simply makes no sense. I conclude that the subsection

(1) (e) language upon which the Tribes rely for their argument of

statutory noncompliance does not address Indian reserved water

rights.

The majority opinion states that if § 85-2-311 (1) (e), MeA,

does not address Indian reserved water rights, then the statute

ignores such rights in contravention of federal law and this

34
,. .
•

Court's opinion in Greely. There is nothing in the extremely

limited factual record in this case to indicate that the proposed

permit use by the applicants will interfere with Indian reserved

water rights. If the statutory language lacks clarity as to the

necessity for consideration of Indian reserved water rights in the

permitting process, that concern should be addressed by statutory

revision.

The Don Brown case out of the First Judicial District Court,

discussed in Justice Nelson's concurring opinion, does not control

by res judicata or collateral estoppel because the statutes were

amended after Don Brown was decided. A claim of existing right is

no longer prima facie proof of its content for all purposes, but

only for "purposes of adjudicating rights pursuant to this part."

Section 85-2-227, MCA. Section 85-2-311, MCA, additionally has

been amended since Don Brown, to require that there must be

unappropriated waters in the source of supply at the proposed point

of diversion and during the period in which the applicant seeks to

appropriate. In short, the ruling in Don Brown as to the effect of

the prima facie statute on permit processing has been superseded by

legislative amendment.
The jurisdictional question discussed in Justice Leaphart's

concurring opinion is not presently before this Court. The Tribes

have reserved the federal questions for their action for

declaratory and injunctive relief in the United States District

Court for the State of Montana, Confederated Salish and Kootenai

Tribes v. Simonich, No. CV-92-54-M-CCL.

35
,. , . ,

The permit process was intended to provide for new water use

prior to adjudication. Now we are left with no such process. This

denies landowners after 1973 the right to any new water use or

change of use until the adjudication process is completed. This

result is not in harmony with the purposes of the Water Use Act to

"coordinate the development and use of the water resources of the

state so as to effect full utilization, conservation, and

protection of its water resources" and to "promote the prosperity

and welfare of the people of Montana through the sound management

of the state's water resources." Sections 85-1-101(3) and -103,

MeA. The result reached by the majority in this case certainly was

not the intended purpose of the Water Use Act, and I do not believe

it is a necessary result of the statutes here interpreted.

I therefore respectfully dissent.

.--r:
Justice Charles E. Erdmann:

I concur in the dissent of Chief Justice Turnage.

Justice

36