Administrative Rules of the State of Montana

BEFORE THE BOARD OF LAND COMMISSIONERS AND

THE DEPARTMENT OF NATURAL RESOURCES

AND CONSERVATION OF THE STATE OF MONTANA

In the matter of the adoption of New Rules I through VIII pertaining to state- owned navigable waterways

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NOTICE OF ADOPTION

To: All Concerned Persons

1. On June 21, 2012, the Department of Natural Resources and Conservation published MAR Notice No. 36-22-144 regarding a notice of public hearing on the proposed adoption of the above-stated rules at page 1225 of the 2012 Montana Administrative Register, Issue No. 12. On August 9, 2012, the department published a notice of extension of comment period on the proposed adoption at page 1597 of the 2012 Montana Administrative Register, Issue No. 15.

2. The department has adopted New Rules II (36.25.1102) and III (36.25.1103) as proposed.

3. The department has adopted New Rules I (36.25.1101), IV (36.25.1104), V (36.25.1105), VI (36.25.1106), VII (36.25.1107), VIII (36.25.1108) as proposed, but with the following changes from the original proposal, new matter underlined, deleted matter interlined.

NEW RULE I (36.25.1101) DEFINITIONS When used in this subchapter, unless a different meaning clearly appears from the context:

(1) "Bed" means an area on or above state-owned land between the low-water marks of a navigable river channel, excepting any portion of the land greater than 50 feet vertically below the thalweg of the channel and excepting any minerals therein.

(2) through (7)(b) remain as proposed.

(c) an interruption or modification to ~~area of~~ the bed of a navigable river below the low-water mark as provided in 70-16-201, MCA~~, which may be modified for a private use~~.

(8) "Hazard" means a physical condition of an improvement, structure, or facility which creates an extraordinary risk of physical harm to persons or property which is so obvious and immediately dangerous that an ordinarily prudent person would observe and appreciate such extraordinary risk and take action to address or eliminate such risk.

(8) through (10) remain as proposed but are renumbered (9) through (11).

(112) "Low-water mark" means the location of the water line of a navigable river at the lowest tenth percentile of historic annual flow as measured by the nearest upstream hydrograph station.

(a) As utilized in this definition, "historic annual flow" is a graph of water flow in the stream expressed in cubic feet per second (cfs) derived from an average of all existing hydrograph records for each day of the year at a hydrograph station immediately above the river segment in question (with water flows in cubic feet per second expressed on the 'y' axis and calendar days expressed on the 'x' axis).

(b) The "lowest tenth percentile" is determined by constructing a cumulative frequency graph of the average annual historic water flow rates measured by a particular hydrograph station, and determining the average annual flow rate which is exceeded 90 percent of the time in that cumulative frequency graph.

(12) remains as proposed but is renumbered (13).

(134) "Navigable river" means a segment of a river adjudicated as navigable for title purposes by a court of competent jurisdiction.

(145) "Public use" means activities on navigable waters that are guaranteed by law to the general public to use navigable waters to fish, hunt, trap, navigate, camp, install docks and wharves, and recreate; provided that no physical occupation by a boat positioned, moored, or anchored in a specific location is made for any longer than fourteen days in any thirty-day period. ~~After the fourteenth day a fee shall be assessed for term use for the entire duration of the stay.~~

(15) remains as proposed but is renumbered (16).

(167) "Thalweg" means the deepest portion of the active channel of a stream or river in any given cross-section of the stream or river.

AUTH: 77-1-204, 77-1-1117, MCA

IMP: 77-1-1110, 77-1-1117, MCA

NEW RULE IV (36.25.1104) AUTHORIZATION FOR USE OF NAVIGABLE WATERWAYS (1) Except as otherwise provided in this rule, the following shall require prior written authorization from the department:

(a) fixed structures placed within the bed of a navigable river or suspended above the bed of a navigable river; and

(b) boats positioned, moored, or anchored longer than fourteen days within any 30-day period within a specific location upon navigable waters ~~shall require prior written authorization from the department~~.

(2) through (5) remain as proposed.

(6) With the exception of applications for authorization sought by the Montana Department of Transportation (MDT), all ~~All~~ necessary federal, state, and local permits shall be acquired by those requesting authorization to use a navigable river or other river as specified in ARM 36.25.1102(3), except where the department issues contingent authorizations under (6)(b).

(a) remains as proposed.

(b) However, the department may choose to issue a lease, license, or easement prior to the department's receipt of permit copies where the lease, license, or easement is conditioned upon the applicant's receipt of a permit and the filing of a copy of the permit with the department.

(7) remains as proposed.

(8) The department may require ~~agreement~~ holders of leases, licenses, or easements to remove hazards from the river, including structures that are no longer in use.

(9) remains as proposed.

AUTH: 77-1-1111, 77-1-1115, 77-1-1117, MCA

IMP: 77-1-1115, 77-2-102, MCA

NEW RULE V (36.25.1105) FEES FOR USES IN NAVIGABLE WATERWAYS

(1) through (3) remain as proposed.

(4) The fee for a lease for the use of the bed of a navigable waterway shall be the greater of the product of the lease rate multiplied by the calculated market value of the footprint, any competitive bid received, or a minimum fee of $150. The process for calculating the market value lease rate will be as described in 77-1-905, MCA, and ARM 36.25.915. The department reserves the right to impose higher market value lease rates where the proposed use of the bed subjects the state, the department, or the trust beneficiaries to greater risk of damage to trust lands. However, generally, the market value lease rates will be guided by consideration of various market and risk factors, including, but not limited to:

(a) through (7) remain as proposed.

(8) Lease and license revenues will be deposited as follows:

(a) from July 1, 2011, through June 30, 2014, to the guarantee account provided for in 20-9-622, MCA; and

(b) on or after July 1, 2014, to the school facility and technology account provided for in 20-9-516, MCA. ~~into the public land trust fund, according to Article X, Section 5(1) of the Constitution.~~

(9) Easement revenues will be deposited into the permanent public land trust fund according to Article X, Section 5(2) of the Montana Constitution.

AUTH: 77-1-209, 77-1-1117, MCA

IMP: 17-3-1003, 77-1-102, 77-1-103, 77-1-1117, MCA

NEW RULE VI (36.25.1106) SELECTION OF LEASE, LICENSE, OR EASEMENT (1) and (2) remain as proposed.

(a) A lease will be issued by the department through a competitive bid process ~~per~~ pursuant to 77-1-904, MCA.

(3) remains as proposed.

AUTH: 77-1-1115, 77-1-1117, MCA

IMP: 77-1-1115, MCA

NEW RULE VII (36.25.1107) RELOCATION AND EXPANSION OF FOOTPRINT; CHANGE OF USE (1) The holder of a lease, license, or easement for a water diversion associated with an existing water right shall submit a notice to the department on a form as prescribed by the department when a footprint or associated facilities are proposed to be relocated or expanded.

(1) remains as proposed but is renumbered (2).

(2) The holder of a lease, license, or easement for a water diversion shall submit an application as prescribed by the department when a footprint or associated facilities are proposed to be relocated or expanded. Initiation of any work within the low-water marks of the navigable river shall begin only after the application has been submitted to the department and the department has authorized the work.

(3) through (7) remain as proposed.

(8) Relocation and expansion of a footprint under a lease, license, or easement for a water diversion structure associated with a water right which represents an historic use under ARM 36.25.1108 is exempt from the Montana Environmental Protection Act (MEPA), 757-1-201, et seq., MCA, and the Antiquities Act, 22-3-401, et seq., MCA.

AUTH: 77-1-1116, 77-1-1117, MCA

IMP: 77-1-134, 77-1-1116, MCA

NEW RULE VIII (36.25.1108) HISTORICAL USES IN NAVIGABLE WATERWAYS (1) Persons using the bed of a navigable river adjudicated before October 1, 2011 ~~[the effective date of these rules]~~, without written authorization from the department prior to October 1, 2011 ~~[the effective date of these rules]~~, that wish to continue the use must complete an application prescribed by the department and provide the application to the department by July 15, 2017.

(2) through (5)(b) remain as proposed.

(i) the applicant or the applicant's predecessor in interest used the bed of a river that has been determined navigable in compliance with ARM 36.25.1101(13), and that the use continues; and

(ii) the historic use of the acreage covered by the footprint which occurred prior to December 7, 2012, or the date the river was adjudicated as navigable, whichever is later; ~~and~~

~~(iii) the use for which authorization is sought is documented by a statement of identical historic use in a notarized affidavit;~~

~~(d) annual payment of the lease or license fee or payment for the full market value of the easement footprint.~~

(d6) tThe authorization for easements is approved by the board. Leases and licenses may be approved by the department.

(6) The lease or license shall automatically terminate should the lessee or licensee fail to make annual payment of the lease or license fee. No easement shall be issued if the easement applicant fails to pay the full market value of the easement footprint.

(7) through (10) remain as proposed.

AUTH: 77-1-1112, 77-1-1117, 77-2-102, MCA

IMP: 77-1-1112, 77-2-102, MCA

4. A summary of the written and oral comments received appear below with the department's responses. "SB 35" refers to Senate Bill 35 (2011 Montana Session Laws, Chapter 359) which was codified in Title 77, chapter 1, MCA.

COMMENT 1:

Clarify the exemptions to the rules to encompass footprints that existed prior to statehood, as well as rights-of-way and patents that were granted, but not yet built prior to statehood. Commenter suggested adding the following language to New Rule VIII(2)(e): "Real property rights in lands beneath a navigable river that vested or accrued prior to November 8, 1889".

RESPONSE 1:

New Rule VIII(2)(b) already adequately addresses this comment, since it clarifies that the proposed rules do not apply to "footprints that existed prior to November 8, 1889", which is the date of Montana's statehood.

COMMENT 2:

Commenter asked to extend the comment period to allow more participation from public entities before proceeding with rulemaking.

RESPONSE 2:

The public comment period was extended from July 19, 2012, to August 31, 2012, to allow for more participation and comment.

COMMENT 3:

There needs to be a penalty clause in the rules, including remedies for the user or applicant if the application is denied. The penalty should include action taken to address the structure itself, as well as the person in violation.

RESPONSE 3:

There is no need to include a civil penalty procedure in the proposed rules. 77-1-125, MCA, authorizes DNRC to impose civil penalties upon persons who install or construct facilities or structures upon state trust lands without prior permission.

COMMENT 4:

The rules need to specify processes for structures with multiple involved parties and clarify who the applicant is: specifically, multiple user structures, and structures that may have separate owners, users, contractors, etc. The rules should clarify who is responsible for applications, fees, and penalties.

RESPONSE 4:

Restrictions on the identity of applicants for use are beyond the scope of this rulemaking. Users should assure themselves that the identity of the applicant for use is consistent with the ownership of the structure.

COMMENT 5:

The rules should reference the Habitat Conservation Plan (HCP) and the Comprehensive Fish and Wildlife Conservation Strategy (CFWCS) regarding application approval, remedial action for structural violations, and potential exemptions for fees to expand footprints to comply with the HCP and CFWCS.

RESPONSE 5:

The recent DNRC HCP applies only to certain classified state forest lands. Applicants for authorization for use of the beds of navigable waters should generally comply with New Rule IV(6) which requires them to obtain all necessary "federal, state, and local permits", prior to making application to DNRC for use of a navigable river bed. However, DNRC retains the discretion under (6)(b) to issue authorizations for use conditioned upon the applicant's receipt of other necessary permits.

COMMENT 6:

There needs to be an environmental analysis completed for these rules.

RESPONSE 6:

The scoping period ended on August 31, 2012, and an environmental assessment which was signed October 30, 2012 and posted to the DNRC web site on November 7, 2012.

COMMENT 7:

The rules should specify which state trust the fees will go to.

RESPONSE 7:

The rules specify revenue deposit information under New Rule V(7) through (9).

COMMENT 8:

Conservation districts have already developed a multi-user application and use it uniformly for 404 and 324 turbidity permits. DNRC should consider using this existing process for simplicity in processing and clarity for the user.

RESPONSE 8:

DNRC will utilize its existing procedures for the processing of applications for use of the beds of navigable waterways.

COMMENT 9:

The rules should include a waiver or implementation incentive for increasing footprints in structures to make them more environmentally sound in ways that comply with the HCP and/or CFWCS.

RESPONSE 9:

See Response 5.

COMMENT 10:

The definition of "footprint" in rule is inconsistent with that in statute.

RESPONSE 10:

The definition in New Rule I(7) has been revised to reflect the statutory definition.

COMMENT 11:

The rules regarding expansion of a footprint are inconsistent with statute. The rules call for prior authorization for the expansion of a footprint, while the statute allows for the expansion for the same use without prior authorization from the DNRC or the Board of Land Commissioners (Land Board or board).

RESPONSE 11:

Under 77-1-1116(2)(b)(i), MCA, the holder of a lease, license, or easement must provide written notice to DNRC for any relocation or increase in size of the footprint. 77-1-1116(2)(b)(ii), MCA, provides that no DNRC approval is required for "lease, license, or easement for water diversion structures associated with a water right". The section specifies that the holder shall then pay full market value for any increase in size. New Rule VII(1) has been revised to be consistent with the provisions of 77-1-1116(2), MCA.

COMMENT 12:

The rules propose that all other permits must be obtained before a license, lease, or easement will be issued. But, floodplain law already requires that floodplain permits be the final permit issued.

RESPONSE 12:

DNRC retains the authority to issue authorizations for use of the beds of navigable waters, which are contingent upon the applicant's receipt of other permits under New Rule IV(6)(b).

COMMENT 13:

The rules should clarify to which rivers they apply.

RESPONSE 13:

See New Rule I(14).

COMMENT 14:

Commenter asked when DNRC will provide notice to landowners as required by 77-1-1114, MCA.

RESPONSE 14:

DNRC will provide notice to landowners following the adoption of these rules.

COMMENT 15:

The rules appear to conflict with, or exceed the authority of the enabling statutes by requiring authorization for fixed structures suspended above the bed of a navigable river.

RESPONSE 15:

The scope of the proposed rules is consistent with the definition of footprint under SB 35, which states: "…means a structure or other constructed interruption or modification to the bed of a navigable river below the low-water mark as provided in 70-16-201 [MCA]". Because navigable waters are public ways under 85-1-111, MCA, interruptions or modifications to the bed are those which may interfere with the public's use of navigable waters for navigation or other uses. Suspended structures above navigable waters which impose physical height restrictions upon the use of those waters, thus, clearly fall within the definition of "footprint" under SB 35.

COMMENT 16:

The rules appear to conflict with, or exceed the authority of the enabling statutes by allowing DNRC to require the removal of hazards.

RESPONSE 16:

77-1-1109(2) and (3), MCA, clarify that the purpose of SB 35 was to: "…clarify the process for the use of the beds of navigable rivers and how the state should be compensated for that use"; and that nothing in SB 35 "…diminishes the state's ownership of the beds of navigable rivers, streams, or lakes under any other law". The Land Board retains the legal authority under 77-1-202, MCA, to manage and control state lands, and to condition the use of those lands where necessary to wisely and safely manage those lands for public uses.

COMMENT 17:

The rules are unclear about choice of lease, license, and/or easement.

RESPONSE 17:

Applicants may apply for either a lease, license, or easement. See New Rule VI.

COMMENT 18:

The rules appear to conflict with or exceed the authority of the enabling statutes with regard to the MEPA application.

RESPONSE 18:

The rules are consistent with MEPA. The Legislature has devised specific MEPA procedures to be followed by the board and the DNRC by enacting 77-1-121, MCA.

COMMENT 19:

There should be a provision to the rules that would allow the state to rescind a lease, license, or easement if it is determined that the use is in violation of federal, state, or local permits, regulations, standards, or laws.

RESPONSE 19:

This provision will be addressed in the lease, license, and easement agreement terms and conditions.

COMMENT 20:

The rules should require that all lease, license, and easement applications be reviewed by the Department of Environmental Quality (DEQ) prior to issuance to ascertain that water quality will not be degraded by the proposed use, whether or not a permit is required.

RESPONSE 20:

New Rule IV(6), requires that all other necessary permits must be obtained before authorization. DEQ will review applicable required permits as part of the lease/license/easement authorization process.

COMMENT 21:

The rules should require that all permits be approved and provided prior to granting the lease, license, or easement.

RESPONSE 21:

See Response 12 and New Rule IV(6).

COMMENT 22:

The rules should not exempt relocation or increase in size of a footprint for use of a navigable riverbed from MEPA.

RESPONSE 22:

Section 4 of SB 35 (77-1-1112, MCA) exempts historical use, and leases, or licenses that expressly state that the lease or license is subject to further permitting under any of the provisions of Title 75 or 82. Section 8 of SB 35 (77-1-1116, MCA) provides there is no prior approval required for relocation or increased footprint of a structure for a lease or license, or for an easement for water diversion structures associated with a water right. New Rule VII(8) has been revised to provide: "Relocation and expansion of a footprint under a lease, or license, or for an easement for a water diversion structure associated with a water right is exempt from (MEPA)…All other easement relocations or expansions will be subject to provisions of 75-1-201, et seq., MCA…".

COMMENT 23:

The term "hazard" in Rule IV(8) is ambiguous and conflicts with statute that addresses landowner rights to place structures in the waterway for the purpose of managing land or water. Provide a definition for "hazard" or remove the section.

RESPONSE 23:

The following definition for "hazard" has been added as New Rule I(8): "…means a physical condition of an improvement, structure, or facility which creates an extraordinary risk of physical harm to persons or property which is so obvious and immediately dangerous that an ordinarily prudent person would observe and appreciate such extraordinary risk and take action to address or eliminate such risk".

COMMENT 24:

Drop the issue. Let current controls stay in force or reduce government intervention through a new bill.

RESPONSE 24:

The DNRC is required to adopt administrative rules to implement SB 35.

COMMENT 25:

The rules should incorporate terms of existing Memorandums of Understanding with MDT.

RESPONSE 25:

See Response 26.

COMMENT 26:

Consideration should be given to the requirements for such matters as issuance of permits to address the processes and time schedules that MDT must adhere to in its right of way construction activities.

RESPONSE 26:

Rule IV(6) has been revised to provide that: With the exception of applications for authorization sought by the Montana Department of Transportation (MDT), all ~~All~~ necessary federal, state, and local permits shall be acquired by those requesting authorization to use a navigable river or other river as specified in ARM 36.25.1102(3)". This revision is necessary to maintain in effect the January 25, 1997, procedural agreement between DNRC and MDT concerning the timing of easement applications made by MDT to DNRC for transportation projects

COMMENT 27:

The definition of "navigable river" seems to use whole-river analysis rejected by the US Supreme Court in PPL Montana v. State of Montana, 565 U.S. ___, 132.Ct. 1215 (2012). It should read "navigable segment of a river".

RESPONSE 27:

DNRC agrees. The definition of "navigable river" in the rules has been revised to be consistent with the segment-by-segment analysis adopted by the U.S. Supreme Court in PPL Montana v. State of Montana, 565 U.S. ___, 132.Ct. 1215 (2012).

COMMENT 28:

The definition of "low-water mark" should be revised to: (1) specify that it applies to navigable segments - "water line of the navigable segment of a river"; (2) include the word "ordinary" in reference to the water mark to be consistent with use in Montana case law to mean that it occurs with regularity – "ordinary low water mark"; (3) the term "historic annual flow" is ambiguous and unclear to which point in time it refers; (4) it is unclear how the rule term "lowest tenth percentile" is determined. Commenter suggested an averaging of water marks over time, including flows from all months of the year, which would result in an overestimate in the area of the low water streambed due to single peaks occurring between May and June. Also, the specification that low-water mark will be "measured by the nearest upstream hydrograph station" may result in inaccurate conclusions downstream, and it excludes other relevant data such as downstream station data, studies by the US Army Corps of Engineers, HECRAS model and other riverine modeling programs, aerial photographs, surveys, and historic evidence of the ordinary low-water mark.

RESPONSE 28:

The definition of "navigable river" has been amended to: "…a segment of a river adjudicated as navigable for title purposes by a court of competent jurisdiction".

"Low-water mark" is defined in these rules as: "…the location of the water line of a navigable river at the lowest tenth percentile of historic annual flow as measured by the nearest upstream hydrograph station". The definition has been revised to clarify that: "…'Historic annual flow' is a graph of water flow in the stream expressed in cubic feet per second (cfs) derived from an average of all existing hydrograph records for each day of the year at a hydrograph station immediately above the river segment in question (with water flows in cubic feet per second expressed on the 'y' axis and calendar days expressed on the 'x' axis)". The definition of "low-water mark" further clarifies that: "…'lowest tenth percentile' is determined by constructing a cumulative frequency graph of the average annual historic water flow rates measured by a particular hydrograph station, and determining the average annual flow rate which is exceeded 90 percent of the time in that cumulative frequency graph".

The U.S. Army Corps of Engineers' Hydrologic Engineering Center's River Analysis System (HEC-RAS) is a computer model which enables engineers to predict expected changes in river locations over time due to changes in stream profiles, such as channel modifications and construction of levees. The definition of low-water mark utilized in the rules is the same definition of low-water mark tacitly accepted by the Montana Supreme Court in DSL v. Jerry D. Armstrong, et al., 251, Mont. 235, 824 P.2d 255 (1992), and it involves the location of the water boundary actually existing at time of the low-water mark. This definition of "low-water mark" does not utilize a computer-model predicted boundary.

COMMENT 29:

"Thalweg" is ambiguous or improperly defined. Surveyors use the term to mean the line of usual navigation on the river. The term "thread" is generally used by surveyors to mean the line of deepest water in a river.

RESPONSE 29:

The definition of "thalweg" has been amended to: "…the deepest portion of an active stream or river in any given cross-section of the stream or river".

COMMENT 30:

New Rule IV(1) states DNRC authorization is required for fixed structures suspended above the bed of a navigable river. This exceeds DNRC's authority as provided in statute to be limited to the footprint of the structure in the bed of the river, and the coinciding definition of "footprint" in statute.

RESPONSE 30:

The scope of the proposed rules is consistent with the definition of footprint under SB 35: "…means a structure or other constructed interruption or modification to the bed of a navigable river below the low-water mark as provided in 70-16-201 [MCA]". Because navigable waters are public ways under 85-1-111, MCA, interruptions or modifications to the bed are those which may interfere with the public's use of navigable waters for navigation or other uses. Suspended structures above navigable waters which impose physical height restrictions upon the use of those waters, thus, clearly fall within the statutory definition of a "footprint" under SB 35.

COMMENT 31:

The definition of "bed" excepts out portions "of the land 50 feet below the thalweg of the channel…". This definition is ambiguous because it is not clear if this means vertical feet or something else.

RESPONSE 31:

The definition of "bed" has been revised to clarify that "bed" excludes that portion of land greater than 50 feet vertically below the thalweg of the channel of a navigable stream.

COMMENT 32:

The definition of "navigable river" in rule is different than navigability tests utilized in the law in the past.

RESPONSE 32:

The definition of "navigable river" in the rules has been revised to comply with the federal test of navigability as expressed by the U.S. Supreme Court in PPL Montana, LLC v. Montana, 132 S. Ct. 1215, 1219, 182 L. Ed. 2d 77 (2012) wherein the Court held that: "To be navigable for purposes of title under the equal-footing doctrine, rivers must be "navigable in fact," meaning "they are used, or are susceptible of being used, ... as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on water." [citing, The Daniel Ball, 10 Wall. 557, 563, 19 L.Ed. 999 (1870)]; and that this determination of navigability is established segment-by-segment.

COMMENT 33:

Restrictions provided within the definition of "public use" should be specified in parts of the rule dealing with the conduct of operations on the river, and not within the definition.

RESPONSE 33:

The definition has been revised to delete substantive restrictions. The substantive restrictions have been added to New Rule IV(1).

COMMENT 34:

New Rule II(2) conflicts with Fish, Wildlife and Parks (FWP) ongoing management of rivers by stating DNRC shall manage and administer the state's navigable rivers.

RESPONSE 34:

77-1-1109(2) and (3), MCA, state that the purpose of SB 35 was to: "…clarify the process for the use of the beds of navigable rivers and how the state should be compensated for that use"; and that nothing in SB 35 "…diminishes the state's ownership of the beds of navigable rivers, streams, or lakes under any other law". The Land Board retains the legal authority under 77-1-202, MCA, to manage and control state lands, and to condition the use of those lands where necessary to wisely and safely manage those lands for public uses. Pursuant to 77-1-301, MCA, DNRC, under the direction of the board, is responsible for the management of state lands. The board and DNRC manage state trust lands from a sovereign and proprietary standpoint. By contrast, FWP has regulatory oversight of boating and recreational use of streams pursuant to 23-2-501, et seq., and 23-2-301, et seq., MCA. New Rule II(2) does not conflict with FWP's regulatory authority.

COMMENT 35:

New Rule II(2)(a) is inaccurate because the whole purpose of the rules is to regulate and prevent public use, and obtain revenue.

RESPONSE 35:

See Response 34.

COMMENT 36:

The provisions in New Rule II(3)(b) are extremely vague and without any basis for understanding of what the rule actually means.

RESPONSE 36:

New Rule II(3)(b) provides that: "[t]he department may issue such contingent-right easements, leases, and licenses only where the department has historical documentation that the river was susceptible of use in commerce at statehood". 77-1-1111, MCA, directs that: "The board or the department may require a lease, license, or easement under this part only for a footprint on the bed of a navigable river". A "navigable river" for this purpose is defined by 77-1-1110(3), MCA, as: "…a river adjudicated as navigable for title purposes by a court of competent jurisdiction". Consequently, under SB 35, Section 3 (77-1-1111, MCA) the board and DNRC cannot require a user of an unadjudicated riverbed to obtain authorization for use of that river or stream bed. The board and DNRC may only require that a user obtain authorization for use only where that segment of the waterway has been adjudicated as navigable for title purposes. However, some users of rivers and streambeds will wish to voluntarily obtain authorizations for use of river and streambeds from the board and DNRC prior to any adjudication taking place. New Rule II(3)(b) clarifies that the board and DNRC may grant authorizations for use of river and streambeds contingent upon their subsequent adjudication as being navigable for title purposes.

COMMENT 37:

New Rule II(3)(c)(ii) refers to notice to adjacent land owners, but does not provide or refer to any means of giving notice or what type of notice is to be given. Nor does the rule define adjacent land owners.

RESPONSE 37:

New Rule II is consistent with the process for giving notice of navigability under 77-1-1114, MCA.

COMMENT 38:

New Rule (IV)(6)(a) refers to permits without explaining what they are for or who provides them.

RESPONSE 38:

The rule refers to local, state, or federal permits necessary for the authorized use.

COMMENT 39:

New Rule IV(8) introduces the word "agreement" without previous clarification of what an "agreement" means. Commenter is unclear if this encompasses leases, licenses, and easements, or is a new class of land user.

RESPONSE 39:

New Rule IV(8) has been amended to delete "agreement" and insert the terms "leases, licenses, and easements".

COMMENT 40:

New Rule IV(9) provides that the leases and easements are assignable. That is not the same as saying that the easements are appurtenant to a dominant tenement. Easements, licenses, and leases may be transferred with the real property. Those two sentences could include legal situations of land ownership that are incompatible.

RESPONSE 40:

There is no conflict between the two sentences in New Rule IV(9). Although appurtenant easements on private lands typically transfer automatically with the title to the dominant tenement (see, Blazer v. Wall, 2008 MT 145, 343 Mont. 173, 183, 183 P.3d 84, 93), upon state lands the easement holder must file an assignment of the easement on DNRC's prescribed easement assignment forms under ARM 36.26.135(3).

COMMENT 41:

New Rule V(4) provides DNRC the right to impose higher market value lease rates for various reasons, which is inconsistent with the set fees provided in (2) and (3).

RESPONSE 41:

Regarding New Rule V: (2) only addresses the application fee for a lease, license, or easement; (3) only addresses the fee for a land use license; and (4) only addresses the fee for leases.

COMMENT 42:

New Rule V(4) specifies that DNRC reserves the right to impose higher lease rates if there is a greater risk of damage to trust lands. Inclusion of risk factor is an entirely different approach than one based on market value. Those provisions should be removed.

RESPONSE 42:

DNRC disagrees.

COMMENT 43:

New Rule V(4)(a) suggests that the cost of demolition and reclamation may be considered when determining the lease fee, but IV(8) specifies that DNRC may require the "agreement holder" to remove hazards. The rules seem to charge the "agreement holder" more than once for undefined reclamation costs.

RESPONSE 43:

The rules provide for the ability to charge for either removal up front, or to require the agreement holder be responsible for removal.

COMMENT 44:

The provisions of New Rule V(4)(c) that refer to the current fee schedule developed by DNRC, creates a circular statement without any reference to what provisions of the schedule might be considered. The provisions should be removed from the rule.

RESPONSE 44:

The fee schedule utilized by DNRC may change periodically based upon current market values and policy directions from the board. Accordingly, under New Rule V(4)(c) the fee schedule may be an element of value to be properly considered when determining the full market value for the conveyance of an interest in state trust land.

COMMENT 45:

The provision in New Rule V(5) that the fee for a lease will be prorated for the first year is directly contradictory to the provisions of (3), which states the license fee for the first year shall be $150 without regard to the date when the license term begins.

RESPONSE 45:

Lease and license agreements grant different rights; thus, the fee structure for each is different, as provided in New Rule V. 77-1-1110(2), MCA, only specifies that the annual fee for a license is $150.

COMMENT 46:

The statement in New Rule V(6)(d) providing the fee for the easement shall be the greater of several factors or the current fee schedule developed by DNRC is ambiguously limitless.

RESPONSE 46:

See Response 44.

COMMENT 47:

New Rule V(7) specifies that application fees for historic use will be deposited into the state special revenue fund. Commenter asked if this should refer to all types of uses, or only historic easements.

RESPONSE 47:

According to 77-1-1112(3)(a), MCA, the application fee for any historic use is $50. 77-1-1113, MCA, specifies that proceeds from the application fee must be deposited into the state special revenue fund to be used to administer the provisions of 77-1-1112, MCA.

COMMENT 48:

New Rule VI(2)(a) provides for a competitive bid process to issue leases per 77-1-904, MCA. That bid process is for commercial leasing.

RESPONSE 48:

The process under 77-1-904, MCA, allows DNRC to solicit bids via requests for proposal and competitive bidding.

COMMENT 49:

New Rule VI(2)(a) provides for a competitive bid process to issue leases per 77-1-904, MCA. This process is inconsistent with the provisions of New Rule V regarding the lease fee determination.

RESPONSE 49:

New Rule V has been amended to provide: "…fee for a lease…shall be the greater of any competitive bid received, the product of the lease rate multiplied by the calculated market value…or a minimum fee of $150".

COMMENT 50:

The rules should contain some specific provision protecting the rights of current individual irrigators to maintain their headgate structures pursuant to the provision of Montana water law, specifically 70-30-102, 85-1-204, and 85-7-1904, MCA.

RESPONSE 50:

The additional language suggested is beyond the scope of this rulemaking.

COMMENT 51:

For clarity, subsection (2) ought to precede subsection (1) in New Rule VII.

RESPONSE 51:

DNRC agrees and has made the amendment.

COMMENT 52:

The use of the word "considered" in New Rule VII(3)(c) is ambiguous. It does not specify what it means to be "considered" or who it will be "considered" by.

RESPONSE 52:

DNRC disagrees.

COMMENT 53:

Commenter asked who will determine if the water right and property benefited by the use remain the same at expansion or relocation as provided in New Rule VII(3)(c)(i).

RESPONSE 53:

DNRC will make that determination.

COMMENT 54:

New Rule VII(7) specifies that the full market value of a footprint will be established through an appraisal conducted in compliance with ARM 36.25.917. This is not congruent with provisions of New Rule V establishing fees for uses.

RESPONSE 54:

New Rule V sets fees for the grant of an original footprint. New Rule VII addresses relocation and expansion of a footprint. 77-1-1116(2)(b)(ii), MCA, requires the payment of the full market value for the use of the expanded area. The process described in New Rule VII(7) for determining full market value for an expansion of a footprint is consistent with this grant of legislative authority.

COMMENT 55:

New Rule VII(8) refers to MEPA requirements of 77-1-201, MCA. 77-1-201, MCA, refers to the authorities of the Board of Land Commissioners and is probably an erroneous reference.

RESPONSE 55:

Commenter is correct. The reference to 77-1-201, MCA, is a typographic error and DNRC has amended the reference to 75-1-201, MCA.

COMMENT 56:

The contents of the application required in New Rule VII concerning historical use should be established.

RESPONSE 56:

DNRC disagrees. The contents of New Rule VII as amended in this notice are adequate.

COMMENT 57:

The criteria for determining if a use shall be authorized as a lease, license, or easement provided in New Rule VI is ambiguous. There should be a structure set out to enable an applicant to determine which type of agreement to apply for, and whether or not he would be granted any.

RESPONSE 57:

DNRC policy will provide guidance for application.

COMMENT 58:

The use of the word "identical" in the provisions of New Rule VIII(5)(b)(iii) is problematic and permits DNRC to deny virtually any historical use.

RESPONSE 58:

The word "identical" has been removed, and the rule as revised requires an affidavit proving historic use occurring prior to October 1, 2011.

COMMENT 59:

New Rule VIII(5)(d) seems to require annual payment prior to the determination of which, if any, type of agreement will be granted.

RESPONSE 59:

New Rule VIII(5)(d) has been stricken, and the content has been revised and inserted as VIII(6).

COMMENT 60:

The rules attempt to exempt lease from survey requirements of 76-3-201, MCA in New Rule VIII(8). However, 76-3-302, MCA provides that the clerk and recorder is not permitted to record an instrument that transfers title or possession of a parcel or tract required to be surveyed unless a certificate of survey has been filed. All leased parcels would be required to be surveyed under the Subdivision and Platting Act.

RESPONSE 60:

Whether or not property interests issued pursuant to these rules or SB 35 must be surveyed in compliance with the Montana Subdivision and Platting Act is beyond the scope of this rulemaking. However, 76-3-205(2), MCA, provides that: "[a] division of state-owned land is not subject to the requirements of this chapter [the Montana Subdivision and Platting Act] unless the division creates a second or subsequent parcel from a single tract for sale, rent, or lease for residential purposes after July 1, 1974". Because no property interest will be issued pursuant to the proposed rules for residential purposes in navigable waters, it is expected that a survey of footprints under these rules will not be necessary for compliance with the provisions of the Montana Subdivision and Platting Act (76-3-101, et seq., MCA).

COMMENT 61:

Due to ambiguities and difficulties in administration, the rules should not be adopted until they have undergone substantial and thorough rewriting and revision.

RESPONSE 61:

DNRC has reviewed and revised a portion of the rules as per the comments it has received.

DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION

/s/ Mary Sexton /s/ Tommy Butler

MARY SEXTON TOMMY BUTLER

Director Rule Reviewer

Natural Resources and Conservation

Certified to the Secretary of State on November 26, 2012.