Chapter 19:One State's Strategy for Putting Water to Beneficial Use

Chapter 19-
One State's Strategy for Putting Water to Beneficial Use

by Ted Schwinden

Abstract

Increased use and competition for water have made shortages and conflicts today's realities in many of Montana's drainages. Montana has begun the implementation of a water resource management program to ensure adequate water supplies for Montanans, both now and in the future. The program has four basic elements:

1) A water adjudication system to document water rights acquired before 1973. Another objective of the adjudication program is to quantify Indian and non-Indian federal reserved water rights.

2) A study authorized by the legislature to determine how much water will be needed for future beneficial use in Montana. The study also examines how potential future water development in Montana may be constrained by downstream water claims.

3) A water reservation system that allows agencies to apply to the state to reserve water for anticipated diversionary future uses or to maintain a minimum flow, level, or quantity of water instream.

4) A water development program which makes state funding available for water projects. Funds for the projects come from several sources, including the Resource Indemnity Trust and revenues from existing state water projects. The program also authorizes low-interest loans and grants to fund public and private water projects, and provides a $250 million bonding authority to implement water projects developed by the state and approved by the legislature.

Few issues are more important to Montana than water and agriculture. If it's safe to say that agriculture is the wheel on which Montana's economy turns, then water is the hub of that wheel.

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In the United States, our limited fresh water supplies cannot satisfy our national thirst forever, if that thirst keeps doubling every twenty years. In some cities, water problems have reached critical proportions; and in some areas, particularly the Southwest, water shortages are threatening agricultural productivity.

Not long ago, Gerald D. Seinwill, of the U.S. Water Resources Council, said that "water is the most serious long-range problem now confronting the nation . . . " Seinwell and other reputable, knowledgeable individuals warn of a water crisis of international dimensions in the 1980s and 90s, of a magnitude comparable to the oil crisis of the 1970s.

I was invited to discuss state and local public policy with regard to strategies and tactics for maintaining agricultural viability in the face of declining water available for irrigation. Accordingly, I will explain in some detail the approach being followed in my own state of Montana.

In Montana, only about 2.6 million acres now are irrigated, but another 10.6 million acres are classified as irrigable. The amount of irrigated land has increased at a very modest pace of about one percent per year, and projections indicate a continued modest growth into the future. That is not to say that all is well with water and agriculture in Montana. The problems that occur are no longer entirely traceable to the vagaries of precipitation patterns.

Instead, increased use and competition for water have made shortages and conflicts today's realities in many of our drainages. In the Milk River, in northern Montana and Canada, for example, the state was forced to impose a moratorium on the issuance of new water use permits. On the Powder River, in southeastern Montana, two companies are in court battling to claim remaining flows-flows clearly insufficient to satisfy their energy-related demands.

In other areas of our state, water quality has become a major concern. Along the Poplar River near my home in northeastern Montana, irrigators fear pollution originating from a Canadian coal-fired generating complex just across the border. In the Tongue River Basin (heart of the Powder River coal area), return flows contribute to a degree of salinity that makes the expansion of irrigation from that source questionable.

Storage frequently offers a solution, but Montana irrigators now pay $5 to $10 for an acre-foot of water. They will not be able to afford the $100 to $200 per acre-foot price tag calculated for some yet-to-be-developed facilities.

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Beyond physical supplies, quality, and economics, another category of issues stem from institutional questions. Hydroelectric claims, for example, appear to pose a limit to new upstream irrigation on the Clark Fork drainage of the Columbia and the headwaters of the Missouri. Federal and Indian reserved rights have not been quantified-although major amounts have been filed-nor have the interstate tributaries been allocated between Montana and Wyoming by the Yellowstone River Compact. Disagreements between upper and lower basin states and skirmishes over prospective interbasin transfers are catapulting Montana's water concerns into the national arena. Governor Janklow of South Dakota got the attention of states all the way from Missouri and Nebraska to Arkansas and the desert Southwest with South Dakota's sale of water for the ETSI pipeline.

Benjamin Franklin said, "When the well's dry, we know the worth of the water." In Montana, we can't afford to wait to find out the real worth of water. Our challenge and our goal is to ensure adequate water supplies for Montanans, not just for irrigation, but for other beneficial uses, both now and in the future. We have therefore begun the implementation of a water resource management program which has four basic elements.

The first is our state's adjudication system, a process which has been appropriately called a way to put a "handle" on Montana's water pump. Since 1973 the Montana Water Use Act has provided an exclusive permit-and-certificate method of acquiring a water right. Before 1973, water rights could be acquired in a number of ways, some of which involved no written documentation of any kind. Consequently, as of today, no one knows exactly how much water is being legally claimed and used in Montana.

Under a recently established program, we have finally begun to quantify and confirm pre-1973 rights. The deadline for filing such claims was April 30, 1982; the Montana Department of Natural Resources and Conservation has begun processing more than 200,000 claims received by that date, and Montana's water courts are setting up the adjudication processes. It is critical to have an accurate quantification of how much water is actually being put to beneficial use in Montana. As a major state newspaper put it, "The best offense against those who might want Montana water is a good defense. What better defense than detailed records of our water and its claimants?"

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Another objective of the adjudication program is the quantification of Indian and non-Indian federal reserved rights. To avoid endless litigation with tribes, the 1979 Montana Legislature established the Reserved Water Rights Compact Commission, which was given the authority to negotiate and conclude compacts with willing tribes.

The second part of our state's water management approach is a so-called "Use It or Lose It" study authorized by the state legislature to determine how much water will be needed for future beneficial use in Montana. Irrigation currently accounts for 95 percent of the water consumed in our state. Industrial, municipal, livestock, rural domestic, and other uses total less than five percent.

The study will also examine how potential future water development in Montana may be constrained by downstream water claims, such as South Dakota's sale. We are reviewing the legal, institutional, and economic incentives and restraints to future water development within Montana and the other Missouri River Basin states. And, finally, the study will examine the options available to resolve conflicting demands: interstate compacts, equitable apportionment suits, and Congressional apportionment.

A third element of Montana's water plan is our water reservation system, authorized by the unique provisions of the 1973 Montana Water Use Act. Under this law, federal and state agencies, as well as political subdivisions of the state, may apply to the state to reserve water for anticipated future diversionary uses, or to maintain a minimum flow, level, or quantity of water instream. The decision-making body is our State Board of Natural Resources, a seven-member citizen board, which now has a planning tool to allocate present supplies, as well as to evaluate and provide for anticipated future needs.

The reservation process, which is lengthy and complex, has been completed only in the Yellowstone Basin, where water has been reserved for agricultural, municipal, multi-purpose storage, and other uses. Fourteen local conservation districts and two irrigation districts sought irrigation water, along with three state and federal agencies; 655,000 acre-feet per year was specifically reserved for that purpose, and additional supplies are to be made available from four planned state and federal storage projects. The state is doing all it can to support irrigation. The conservation districts received substantial assistance from the state in preparing documented reservation requests and in

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representation during the complicated hearings process. Two full-time state employees are helping the conservation districts develop the detailed plans and the administrative processes necessary to put the reserved water to work. The state is moving to establish reservations in other drainages as well, and I am hopeful that adequate future supplies for irrigation and other beneficial uses can be guaranteed.

The fourth and final element of Montana's water management effort provides state financing for water projects. It's no secret that federal funding for water projects has faltered under President Reagan's economic recovery program. For example, the Land and Water Conservation Fund, which had made $3 million available in Montana for water projects annually, has been cut to literally nothing. The Small Loan Program of the Bureau of Reclamation historically provided low-interest loans for irrigation projects, but all of its approved projects have been shelved for the past two years. The Farmer's Home Administration has only one-half of its normal allotment, and the five-state Old West Regional Commission, which provided planning funds for water projects, went out of business a year ago. At the same time, increased competition for (and pressure on) our water resources have made it clear that additional storage, conservation measures, and increased irrigation efficiencies are essential.

In that context the Montana State Legislature unanimously approved my first major proposal as Governor in 1981: Senate Bill 409. This was a bold measure, putting state government into a leadership role in the development of the state's water resources. The 1981 legislation supplies funds for water development from several sources. About $1 million a year comes from the earnings of the Resource Indemnity Trust, funded by a severance tax on all minerals. About $300,000 in annual revenues from our state-owned water projects are being used to: (1) plan the rehabilitation of state-owned projects and develop their hydropower potential, (2) assist conservation districts in implementing their water reservations, (3) encourage the development of offstream and tributary storage, and (4) promote joint state, tribal, and federal projects.

SB 409 also authorized low-interest loan and grant programs to fund public and private projects or activities associated with water. That loan/grant program is funded by coal severance taxes to the amount of about $2.5 million annually. An additional $5 million can be made available for loans through general obligation bonding authority (requests to date exceed $27 million).

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Finally, SB 409 provides a $250 million bonding authority, which can be used to implement water projects developed by the state and approved by the legislature.

I consider the passage of the 1981 water development program to be the major accomplishment of my administration. Clearly, it is one of the most important acts in Montana's water history. Nevertheless, there is much work to do in the area of water project financing if Montana's irrigation potential is to be realized. One approach to funding is through the cooperation of federal, state, and local entities. That approach is used on the Tongue River Dam, a state-owned project in southeastern Montana, where the Northern Cheyenne Tribe, the U.S. Bureau of Reclamation, the U.S. Bureau of Indian Affairs, and the State of Montana are cooperatively funding a feasibility study aimed at an equitable allocation of water, and determining the cost for that water. We are trying to reach a "good-neighbor" agreement with Wyoming on how much Tongue River water can be stored in an enlarged project under the provisions of the Yellowstone Compact-the Tongue River being one of the interstate tributaries governed by that document.

Industry can directly assist agriculture. In Utah, for example, a dam proposed to meet the needs of oil shale interests will also provide for the irrigation of Indian lands. In Wyoming, an energy company paid to enlarge and rehabilitate an existing dam to correct safety problems and to protect agricultural supplies, while providing water for its own uses. In Montana, the state might act as an intermediary in the sale of industrial water now available from the Fort Peck, Yellowtail, and Tongue River reservoirs, where proceeds could be used to help offset the cost of irrigation.

On the other hand, the development of heavy oil, tar sands, oil shale, coal generation, gasification and liquefaction plants could seriously disrupt water use by agricultural users. Perhaps energy-rich, but water-short, states should export raw energy resources to more water-abundant demand centers for processing and conversion. In any event, when energy conversion takes place in the semiarid West, we must encourage the use of the most water-conservative technologies, even if those technologies are more expensive.

State governments can employ three other approaches to expand irrigated land, to maintain it at its current level, or to slow the progress of its decline. The relative importance of agriculture in each state will dictate the selection and application of the remedies.

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One avenue is to use tax incentives to keep land and water in agricultural production-or, conversely, to impose penalties for converting them to other uses. A second approach is to utilize water law. Montana, for example, prohibits an appropriator of more than 15 cubic feet per second (cfs) from changing an agricultural water right to an industrial right. Other statutory approaches could include a preference system to establish agriculture as a preferred use, allowing municipalities to condemn agricultural water rights, or prohibiting the severance or sale of water rights once they have been perfected for agricultural purposes.

The third approach involves land use controls-ranging from the purchase of development rights, to subdivision regulation, to the type of state-level land-use planning done in Oregon. Government banking of agricultural land for future lease or sale to individuals, as practiced in Saskatchewan, is an innovative land-use concept that deserves review and evaluation.

With respect to local government's role in maintaining agricultural viability, I will mention only two points. The first relates to soil and water conservation districts. In Montana, these districts have evolved into responsible, effective organizations. Conservation districts along the Yellowstone have reserved water for future irrigation, are making plans to develop that water, and in the process, are becoming a significant water management force in the basin. Conservation districts in northcentral Montana have been conducting an effective saline seep control demonstration project for several years, and are a major force in combating that epidemic problem. Enabling legislation in Montana authorizes conservation districts to levy taxes, to initiate projects, and to create and enforce regulations with the effect of law. Those powers have generally been unexercised in the past, but that is beginning to change. Conservation districts have the potential to become major agricultural and natural resource entities in the future.

States cannot expect local government to continually shoulder an increasing share of water development responsibilities without providing them adequate funding. Under the New Federalism, state governments are getting a crash lesson in learning the limits of their abilities to assume the provisions of federal programs-but it's easy to forget that lesson. That's why, in Montana, I'm proposing a new method of distributing funds to local government through a block grant system. Cities and counties will receive, with greatly expanded flexibility, all the present

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taxes and fees, and we will ask for an additional state General Fund appropriation and a specific percentage of the state oil severance tax to go to local governments.

The "bottom line" is that it will take more than the initiative and cooperation of local and state governments to resolve the problems facing irrigated agriculture. There must be a responsible federal role. And money!