Teton Co-Op Canal Co. v. Teton Coop Reservoir Co.

Teton Co-Op Canal Co. v. Teton Coop Reservoir Co., 2015 MT 344 (Dec. 15, 2015) (Baker, J.) (5-0, rev’d)

Issue: Whether the Water Court erred in determining that off-stream water storage in the Eureka Reservoir was included as part of the Teton Canal’s April 18, 1890 Notice of Appropriation.

Short Answer: Yes.

Reversed and remanded

Facts: Teton Canal was formed in 1903 for the purpose of appropriating, transporting, storing and using water for irrigation in Teton County. It claims its priority date for the Eureka Reservoir under an April 18, 1890 Notice of Appropriation. In that notice, Teton Canal’s predecessors claimed 3,000 inches of Teton River water for the purpose of gathering water in a reservoir and using it to irrigate adjacent lands. Under an April 29, 1891 Notice of Appropriation, Teton Canal’s predecessors claimed 10,000 inches of Teton River water for irrigating, reservoirs and other purposes.

After filing the 1890 notice, Teton Canal’s predecessors immediately began constructing the Glendora Canal, and eventually formed the Eureka Reservoir Canal and Irrigation Company. In 1908, in Perry v. Beattie, the court decreed that Teton Canal is entitled to 3,000 inches of water under the April 1890 decree. Teton Canal’s claims under the 1891 notice did not survive the Perry decree.

In 1921, Teton Canal filed a notice of appropriation for 100 cfs of the flood waters of the Teton River for the purpose of storing water in a reservoir, the description of which corresponds with the Eureka Reservoir’s current location and its location on the 1892 plat map. The Water Conservation Board filed a declaration of intent to store, control and divert water on Dec. 3, 1936 by “means of the ‘Teton Cooperative Canal Company Project.’” Teton Canal and the Water Conservation Board jointly constructed the Eureka Reservoir from 1936-1937. The Water Conservation Board turned over ownership of the reservoir to Teton Canal in 1946, and in 1947 and 1957, the capacity of the dam was increased to its current 5,500 acre feet.

Teton Canal filed a statement of claim in 1982 for six distinct water rights, all of which appeared in the Temporary Preliminary Decree with a priority date of April 18, 1890. Teton Reservoir and the Lower Teton Joint Objectors objected to all six claims. Eventually all parties but the Teton Reservoir settled their objections. Teton Reservoir contends that Teton Canal predecessors developed the 1890 notice, which did not contemplate the Eureka Reservoir, that Teton Canal did not proceed with reasonable diligence in developing the reservoir, and that Teton Canal’s priority date for the reservoir is based on the 1936 Declaration.

Procedural Posture & Holding: The Water Master held a hearing on Teton Reservoir’s objections in October 2012, and the Water Court order was issued in February 2015, concluding that Teton Canal’s claims for the Eureka Reservoir were properly administered under the 1890 notice. It further concluded that later additions to the Eureka Reservoir were expansions of the original appropriation that must be reflected in more junior water rights claims. It determined that Teton Canal’s total annual volume for all claims is 14,000 acre feet, that its period of use runs from April 20-October 14, and that its historical place of use totals 17,332 acres with a 7,650 acre limit on annual irrigation. Finally, it determined that Teton Canal’s stockwater claims are valid reflections of historical use. Teton Reservoir appeals, and the Supreme Court reverses.

Reasoning: The evidence establishes that the Glendora Canal is the diversion point described in the 1890 notice, which was developed by Teton Canal’s predecessors. The Water Court’s finding to the contrary is clearly erroneous. The evidence further shows that Teton Canal’s predecessors intended to, and did, develop and maintain off-stream water storage in the Glendora Reservoir under the 1890 notice, and intended to, and did, convey water in the Eureka Canal under the 1891 notice, which did not survive the Perry decree. The court’s findings that the Eureka Reservoir’s priority date is based on the 1890 notice is clearly erroneous.

Teton Canal argues that it simply moved the 1890 notice’s diversion point two miles upstream after Perry. Regardless, the evidence shows Teton Canal failed to proceed with reasonable diligence in developing the reservoir. Even if the diversion point was moved, the reservoir’s completion in 1937 cannot relate back to the 1890 filing. Reasonable diligence requires a steady, ongoing effort in good faith to develop the reservoir. The record shows this dis not occur until the mid-1930s.

The Court remands to the Water Court to determine a priority date for the Eureka Reservoir that is in accordance with the evidence.