Last month, the U.S. Supreme Court announced its decision in PPL Montana v. Montana. It was a much deserved 9-0 smackdown of the Montana Supreme Court’s ruling that dams operated for decades by PPL Montana and its predecessors were located on land owned by the state of Montana, and that rent, to the tune of $41 million, was in arrears.
On the surface, the case looked like a local dispute turning on technical questions that only a few dozen water lawyers could understand or care about. It centered around the legal definition of navigability for the purpose of determining ownership of lands lying beneath PPL Montana hydroelectric facilities on three Montana rivers. The state of Montana claimed title to the lands and demanded back rent from PPL Montana. The company claimed that the submerged lands in question are owned by the riparian landowner, in most instances the United States, and that it had been paying rent for decades to the U.S. government.
Who owns the lands beneath America’s rivers? Since the founding of the republic it has been understood that, pursuant to the equal-footing doctrine, the states own lands under navigable rivers, while the riparian owners have title to lands under non-navigable rivers. Thus, title depends on whether a river is navigable. Since before Montana’s statehood in 1889, it has been settled that, for the purpose of determining state title to submerged lands, the river in question must have been navigable in fact or susceptible to navigation at the time of statehood.
Thus, the case has national implications of enormous consequence in terms of both title to submerged lands and property rights in general. If the Montana Supreme Court decision had been upheld, it would have effectively transferred to the state, from the United States and thousands of private owners, title to land underlying roughly 500 miles of Montana rivers. And it would have cleared the way for similar confiscations on thousands of miles of waterways in other states.
Much of that land has been recorded for decades as private property on which property taxes have been paid, and on which irrigation head gates and other facilities are located. Thousands of ranchers and farmers were next in line to be invoiced for past rent.
For the entirety of the 20th century, Montana made no claim to own the lands at issue in the lawsuit. The state, and everyone else, assumed that the lands were owned either by the United States, dating back to the Louisiana Purchase, or by private parties, where the adjacent lands had been transferred to private ownership. Not until a dozen years ago did it occur to the state that the submerged lands could be a good source of revenue.
The PPL Montana case involved submerged lands on the Madison, Clark Fork and Missouri rivers. On the Madison, the question was whether one failed effort to float a log raft and modern recreational use are evidence of navigability at the time of statehood. On the other rivers, the question was whether river segments interrupted by impassable waterfalls and rapids (extending over a stretch of 17 miles on the Missouri) should be considered navigable because other stretches of those rivers have been navigated.
The U.S. Supreme Court found the Montana high court in error on the Madison because present-day recreational use is not proof that “the river could sustain the kinds of commercial use that…might have occurred at the time of statehood.” With respect to the Clark Fork and Missouri, the Montana court’s rejection of “a piecemeal classification of navigability — with some stretches declared navigable, and others declared nonnavigable,” was found to ignore Supreme Court precedent to the contrary. “The segment-by-segment approach to navigability for title is well settled,” wrote Justice Anthony Kennedy, “and it should not be disregarded.”
The case will be remanded to the Montana court for a determination of whether any of the river segments in question are navigable consistent with Supreme Court precedent, although the Court left little room for a finding of navigability. But that does not mean that private property in submerged lands is now free of threats from the state of Montana.
In its brief and oral argument before the Supreme Court, Montana linked its ownership claim in submerged lands to the public-trust doctrine on which the Montana Supreme Court previously relied to allow public access to private lands. The high court correctly dismissed the argument as irrelevant to establishing state title. Unlike the constitutional equal-footing doctrine pursuant to which all states enter the union with title to submerged lands under rivers navigable at the time of statehood, said the Court, the public-trust doctrine is a matter of state law.
Because the Montana Supreme Court has aggressively expanded common law public-trust doctrine beyond all recognition, owners of submerged lands in the state may find themselves subject to uncompensated constraints on the use of their now confirmed property rights. But at least the PPL Montana decision has eliminated the incentive for state officials to seek rents on what people reasonably believe is their own property.
James L. Huffman is dean emeritus at Lewis & Clark Law School and a member of the Hoover Institution Task Force on Property Rights, Freedom and Prosperity.