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Supreme Court sets hearing on hydro challenge to Montana riverbeds rent

WASHINGTON 9/27/11 (PennWell) –- The Supreme Court has scheduled arguments Dec. 7 for PPL Montana's appeal of a state court order that the company pay Montana $41 million in back rent for use of riverbeds occupied by the utility's hydroelectric facilities.

The Montana Supreme Court ruled in March 2010, upholding First District Judge Thomas Honzel, who said the state owns more than 500 miles of riverbeds and that PPL Montana owes $34.8 million for 2000-2006, and $6.2 million for 2007. Amounts to be paid going forward are to be determined by the Board of Land Commissioners.

"This came as quite a shock," PPL Montana's court brief said, "because for more than a century the riverbeds beneath those facilities have been treated as owned by private parties or the federal government. In reaching this result, the lower court concluded that the rivers were navigable when Montana joined the Union in 1889 and, therefore, that Montana held title to the riverbeds."

PPL noted the Montana Supreme Court upheld the ruling despite 500 pages of expert testimony and exhibits establishing that the river sections, on the Missouri, Madison, and Clark Fork rivers, were not navigable at statehood.

"If Montana's action is allowed to stand, other states will surely follow suit with their own judicial takings, with the demand for 'just compensation' coming from, not against, the state," PPL Montana argued. "This court can provide a meaningful check on that powerful temptation for abuse by reiterating the uniform federal standard and fixed set of rules that govern navigability for title purposes."

The U.S. Justice Department filed a brief Sept. 7 supporting PPL Montana's position. The Supreme Court had requested the Obama administration's opinion on the subject. The Justice Department said the Montana courts should not have decided on summary judgment that the river sections were navigable without resolving factual questions about each river section's navigability at statehood.

PPL Montana's hydropower holdings include 326.9-MW Missouri-Madison (No. 2188), 10-MW Mystic Lake (No. 2301), and 92.6-MW Thompson Falls (No. 1869). The company acquired the projects from Montana Power Co. in 1999.

Two other utilities once involved in the case, Avista Corp. and PacifiCorp, settled rather than go to trial on the state lawsuit. Avista and PacifiCorp are regulated utilities and can pass the costs of the rents through to their ratepayers. PPL Montana is not regulated by the state and does not have a mechanism for passing along the cost.

Avista agreed to pay millions of dollars in rent each year to the state for riverbeds occupied by the utility’s hydroelectric facilities, including $4 million for 2007. PacifiCorp agreed to lease 47.84 acres of riverbed in the Swan River in return from being dropped from the case.


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