AN ACT ALLOWING BROADER LEASING OF SALVAGE WATER CREATED THROUGH CONSERVATION PROJECTS; EXTENDING FOR 10 YEARS THE TERM OF THE INSTREAM FLOW LEASING PROGRAM OPERATED BY THE DEPARTMENT OF FISH, WILDLIFE, AND PARKS; ALLOWING A LONGER LEASE TERM FOR LEASES ASSOCIATED WITH DEPARTMENT INVESTMENTS IN WATER CONSERVATION PROJECTS; INCREASING THE NUMBER OF STREAM REACHES THAT CAN BE LEASED FROM; AMENDING SECTIONS 85-2-419, 85-2-436, 85-2-437, AND 85-2-438, MCA, SECTION 11, CHAPTER 658, LAWS OF 1989, AND SECTIONS 4 AND 7, CHAPTER 740, LAWS OF 1991; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A TERMINATION DATE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

Section 1. Section 85-2-419, MCA, is amended to read:

"85-2-419. Salvaged water. It is the declared policy of the state in 85-1-101 to encourage the conservation and full use of water. Consistent with this policy, holders of appropriation rights who salvage water may retain the right to the salvaged water for beneficial use. Any use of the right to salvaged water for any purpose or in any place other than that associated with the original appropriation right must be approved by the department as a change in appropriation right in accordance with 85-2-402. Sale of the right to salvaged water must also be in accordance with 85-2-403, and the lease of the right to salvaged water for instream flow purposes must be in accordance with 85-2-408, 85-2-436, or 85-2-439."

Section 2. Section 85-2-436, MCA, is amended to read:

"85-2-436. (Temporary) Water leasing study. (1) The department of fish, wildlife, and parks and the department, in consultation with the environmental quality council, shall conduct and coordinate a study that, at a minimum:

(a) provides the following data for each designated stream reach and each pilot lease entered into under subsection (2):

(i) the length of the stream reach and how it is determined;

(ii) technical methods and data used to determine critical streamflow or volume needed to preserve fisheries;

(iii) legal standards and technical data used to determine and substantiate the amount of water available for instream flows through leasing of existing rights;

(iv) contractual parameters, conditions, and other steps taken to ensure that each lease in no way harms other appropriators, particularly if the stream is one that experiences natural dewatering; and

(v) methods and technical means used to monitor use of water under each lease;

(b) based on the data provided under subsection (1)(a), develops a complete model of a water lease and lease authorization that includes a step-by-step explanation of the process from initiation to completion.

(2) (a) For purposes of undertaking the study described in subsection (1) and as authorized by law, the department of fish, wildlife, and parks and the department may engage in the activities described in this subsection (2). Except as provided in 85-2-439, for purposes of this study, this section is the exclusive means by which the department of fish, wildlife, and parks may seek to change an appropriation right to an instream flow purpose.

(b) The department of fish, wildlife, and parks, with the consent of the commission, may lease existing rights for the purpose of maintaining or enhancing streamflows for the benefit of fisheries in stream reaches determined eligible by the department pursuant to 85-2-437.

(c) Upon receipt of a correct and complete application for a lease from the department of fish, wildlife, and parks, the department shall publish notice of the application as provided in 85-2-307. Parties who believe that they may be adversely affected by the proposed lease may file an objection as provided in 85-2-308. A lease may not be approved until all objections are resolved. After resolving all objections filed under 85-2-308, the department shall authorize a lease of an existing right for the purpose of maintaining or enhancing streamflows for the benefit of fisheries if the applicant submits a correct and complete application and meets the requirements of 85-2-402.

(d) The application for a lease authorization must include specific information on the length and location of the stream reach in which the streamflow must be maintained or enhanced and must provide a detailed streamflow measuring plan that describes the points where and the manner in which the streamflow must be measured.

(e) The maximum quantity of water that may be leased is the amount historically diverted by the lessor. However, only the amount historically consumed, or a smaller amount if specified by the department in the lease authorization, may be used to maintain or enhance streamflows below the lessor's point of diversion.

(f) The lease may not be issued for a term of more than 10 years, but it may be renewed once for up to 10 years, except that a lease of water made available from the development of a water conservation or storage project is restricted to a term equal to the expected life of the project but to not more than 30 years. Upon receiving notice of a lease renewal, the department shall notify other appropriators potentially affected by the lease and shall allow 30 days for submission of new evidence of adverse effects to other water rights. A lease authorization is not required for a renewal unless an appropriator other than an appropriator described in subsection (2)(j) submits evidence of adverse effects to the appropriator's rights that has not been considered previously. If new evidence is submitted, a lease authorization must be obtained according to the requirements of 85-2-402.

(g) During the term of the lease, the department may modify or revoke the lease authorization if an appropriator other than an appropriator described in subsection (2)(j) proves by a preponderance of evidence that the appropriator's water right is adversely affected.

(h) The priority of appropriation for a lease under this section is the same as the priority of appropriation of the right that is leased.

(i) Neither a change in appropriation right nor any other authorization is required for the reversion of the appropriation right to the lessor's previous use.

(j) A person issued a water use permit with a priority of appropriation after the date of filing of an application for a lease authorization under this section may not object to the exercise of the lease according to its terms or the reversion of the appropriation right to the lessor according to the lessor's previous use.

(k) The department of fish, wildlife, and parks shall pay all costs associated with installing devices or providing personnel to measure streamflows according to the measuring plan submitted under this section.

(3) (a) The department of fish, wildlife, and parks shall complete and submit to the department, commission, and environmental quality council an annual study progress report by December 1 of each year. This report must include the applicable information listed in subsection (1) for each lease, a summary of stream reach designation activity under 85-2-437, and a summary of leasing activity on all designated streams. If the department of fish, wildlife, and parks has not leased additional water rights under this section by December 1 of any year, the department of fish, wildlife, and parks shall provide compelling justification for that fact in the study progress report.

(b) A final study report must be adopted by the department and commission and submitted to the environmental quality council, which shall complete the final report by December 1, 2008.

(4) This section does not create the right for a person to bring suit to compel the renewal of a lease that has expired. (Terminates June 30, 2009.)"

Section 3. Section 85-2-437, MCA, is amended to read:

"85-2-437. (Temporary) Department designation of eligible stream reaches. (1) The department of fish, wildlife, and parks, with the consent of the commission, may apply to the department for designation of stream reaches for which water leasing to maintain or enhance streamflows pursuant to 85-2-436 may occur.

(2) The department may declare a stream reach eligible for leasing pursuant to 85-2-436 only if it finds that water leasing is necessary to maintain or enhance streamflows for fisheries.

(3) The department may designate no more than 40 stream reaches in the state where water leasing pursuant to 85-2-436 may occur. If the department of fish, wildlife, and parks determines that a water lease cannot be reasonably obtained on a designated stream reach, the department may remove the designation from that stream reach and designate another stream reach pursuant to this section. (Terminates June 30, 2009.)"

Section 4. Section 85-2-438, MCA, is amended to read:

"85-2-438. (Temporary) Lease validity. All leases entered into prior to June 30, 2009, remain valid until the expiration date of the lease. (Terminates June 30, 2009 .)"

Section 5. Section 11, Chapter 658, Laws of 1989, is amended to read:

"Section 11. Termination. [This act] terminates June 30, 2009."

Section 6. Section 4, Chapter 740, Laws of 1991, is amended to read:

"Section 4. Section 11, Chapter 658, Laws of 1989, is amended to read:

"Section 11. Termination. [This act] terminates June 30, 2009.""

Section 7. Section 7, Chapter 740, Laws of 1991, is amended to read:

"Section 7. Termination. [This act] terminates June 30, 2009."

Section 8. Effective date. [This act] is effective on passage and approval.

Section 9. Termination. [Sections 2 through 8 and this section] terminate June 30, 2009.

- END -

I hereby certify that the within bill,

SB 0098, originated in the Senate.

Secretary of the Senate

President of the Senate

Signed this	day

of	, .

Speaker of the House

Signed this	day

of	, .

SENATE BILL NO. 98

INTRODUCED BY K. MESAROS, V. COCCHIARELLA, L. GROSFIELD, K. OHS, S. STANG, B. TASH

BY REQUEST OF THE ENVIRONMENTAL QUALITY COUNCIL

AN ACT ALLOWING BROADER LEASING OF SALVAGE WATER CREATED THROUGH CONSERVATION PROJECTS; EXTENDING FOR 10 YEARS THE TERM OF THE INSTREAM FLOW LEASING PROGRAM OPERATED BY THE DEPARTMENT OF FISH, WILDLIFE, AND PARKS; ALLOWING A LONGER LEASE TERM FOR LEASES ASSOCIATED WITH DEPARTMENT INVESTMENTS IN WATER CONSERVATION PROJECTS; INCREASING THE NUMBER OF STREAM REACHES THAT CAN BE LEASED FROM; AMENDING SECTIONS 85-2-419, 85-2-436, 85-2-437, AND 85-2-438, MCA, SECTION 11, CHAPTER 658, LAWS OF 1989, AND SECTIONS 4 AND 7, CHAPTER 740, LAWS OF 1991; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE AND A TERMINATION DATE.