SUPREME COURT:

Justices wade into raging dispute over riverbed ownership

THOMPSON FALLS, Mont. -- When he looks down at the frothing Clark Fork River from his vantage point on a high rocky outcrop, Noel Jacobson can't help cracking a smile.

He is amused by the notion that the river could be deemed navigable here at Thompson Falls, about two hours west of Missoula.

"Logically, you would say it's not navigable," Jacobson said as he gestured toward the fast-flowing channels that cut between two huge rocks in the middle of the river.

The object of his ridicule is a Montana Supreme Court ruling from March 2010, in which a majority held that this and two other rivers -- the Missouri and the Madison -- are navigable.

The court decision has serious implications for PPL Montana, which owns 10 dams on the three rivers, including one that spans the river at Thompson Falls and is managed by Jacobson.

In finding the rivers navigable, the court concluded that the state owns the riverbeds, which means PPL owes $40 million in rent for its use of the riverbeds since the company acquired them in 1999.

The court based its ruling on an 1845 U.S. Supreme Court case that said states hold title to riverbeds if the river was navigable at the time the state was admitted to the Union.

Clad in denim and wearing a white safety helmet, Jacobson pointed out that, on this day, the dam was open, making the flow of water more like what the river might have been before the dam was built in 1915.

It is a tableau that might be of interest to the nine justices of the U.S. Supreme Court, who will review the Montana court ruling when they hear arguments Dec. 7.

To the easygoing Jacobson, who has worked at the plant since 1997, the navigability question has a simple answer: Look at the raging waters and figure out if a boat could have passed through in 1889, the year Montana was admitted to the Union.

But it's not as simple as that.

For the kids

The tussle over who owns the riverbeds arose out of a debate in Montana over how the state utilizes public lands.

Like in other Western states, certain tracts were put into public trusts at the time Montana was admitted to the Union.

Among them are lands set aside for funding schools. Over the years, some Montanans have speculated whether the state has made the best use of its lands, which, they claim, could have had a detrimental effect on the revenue generated.

It was Helena-based lawyer John Bloomquist who came up with the idea of focusing on riverbeds.

Bloomquist immediately thought of it when several school districts first contacted him to ask about whether the state was making best use of its assets.

"One of the issues I had always been interested in was whether the state of Montana was receiving compensation for the stream beds," he said

A subsequent investigation confirmed that "no compensation was being provided," he added.

Bloomquist joined with a Bozeman law firm, Goetz, Gallik & Baldwin and -- representing the school districts and some individual parents -- filed suit in 2003, arguing that the state had "failed to obtain full market value" for the land upon which hydroelectric projects were located as required under state law.

That notion was a surprise to PPL, which has always operated under the principle that either it, the federal government or other private landowners owned the riverbeds on which its projects are located (two other power companies were initially involved in the case but later settled with the state after agreeing to lease the riverbeds).

At that initial stage, the state was not involved in the case, James Goetz -- one of Bloomquist's co-counsels -- recalled.

"We attempted to persuade the Montana attorney general to come with us," he said. "They declined initially."

Ironically, at that point, navigability was not at issue. The state's Supreme Court brief notes that PPL "conceded the navigability of the rivers."

No more.

Lewis and Clark

At a viewpoint overlooking a new fish ladder that PPL recently installed at the dam -- to assist bull trout, a threatened species -- is an informational display that features a 1908 photo of Thompson Falls, taken seven years before the dam was built.

The grainy black-and-white image clearly shows the river shooting down the falls just downstream from where the dam now stands.

Experienced whitewater rafters might fancy their chances, but anyone else might think twice before trying to navigate their way downstream.

If the answer were as straightforward as that, the case would not have ended up in the Supreme Court.

"The question isn't whether you would have taken a boat down the falls," said Gregory Garre, a Washington-based partner at Latham & Watkins, who will argue the case for the state.

Traditionally, the test of whether a river is navigable also touches upon whether the river was used as a "highway of commerce," he added.

The state maintains this was the case with all three rivers. At the Thompson Falls dam, for example, there was a log chute where the fish ladder now sits. Fur traders and miners also used the rivers, the state argues.

Then of course, there is the evidence supplied by two of the most famous figures in the mythology of the West: explorers Meriwether Lewis and William Clark, who traveled along Montana's rivers.

However, they had to portage around tricky sections.

The journey around Great Falls took 33 days.

That still doesn't mean it should be described as nonnavigable, according to Garre.

"The fact there are interruptions in the form of falls or rapids doesn't defeat a finding of navigability," he said.

PPL and the federal government, which has sided with the power company, beg to differ.

As solicitor general Donald Verrilli pointed out in the government's brief, under the Montana Supreme Court's test, any river the U.S. Supreme Court has previously held to be nonnavigable "could be portaged in theory, with enough time and effort."

PPL argues that the correct analysis is to look at sections of the river and determine navigability on a piecemeal basis.

The company's lawyer, Paul Clement, a partner at the Bancroft firm in Washington, notes in his brief that the state never claimed title to the riverbeds in the past.

As for the Clark Fork River, he points out that in 1910 a federal court ruled on the navigability of the section around Thompson Falls.

The river, the judge wrote, was a "non-navigable, torrential, mountain stream, full of rapids and falls."

Property rights case

It is fair to say that PPL Montana v. Montana is not one of the most high-profile cases on the Supreme Court's docket in the 2011 term, which officially begins today and could include a blockbuster ruling on health care reform.

But Thor Hearne, a partner at Arent Fox who filed a brief on behalf of the libertarian Cato Institute and others in support of PPL, said a ruling on the navigability test would be useful in other states, particularly those west of the Mississippi River.

The Montana court "certainly broke company with the previous way every court considered navigability" and, in doing so, infringed on private property rights, he added.

Leon Szeptycki, who teaches environmental law at the University of Virginia School of Law and often represents conservation groups, has a different view: that a ruling for PPL would allow property owners to assert ownership over rivers traditionally viewed as being public land.

"It would result in a decrease in public access to rivers," Szeptycki said.

The signs are not good for the state, however, including the fact that the Obama administration has sided with PPL.

"It doesn't bode well" for the state that the Supreme Court even agreed to hear the case, said Bozeman attorney Goetz -- now merely an interested observer because the state did not allow his firm to remain involved.

That is all good news to PPL's Jacobson at Thompson Falls.

He is hoping that what he sees as common sense holds sway when the justices hand down a ruling next year, but he knows that won't necessarily happen.

"How it will shake out, I don't know," he said. "Let's just get this answered."

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