Bill That Would Sell Isolated State Land to Neighboring Landowners Nears Gianforte’s Desk
House Bill 676 directs the Land Board to sell isolated sections of state land to lessees who own adjacent property
On a tailwind of Republican support, the Montana Legislature has advanced a bill that would facilitate the sale of isolated sections of state trust land.
House Bill 676 is a sweeping 22-page bill sponsored by House Speaker Brandon Ler, R-Savage, that addresses multiple aspects of water rights and the administration of state trust lands.
Although several components of the bill drew scrutiny during a hearing before the Senate Judiciary Committee last week, perhaps the most controversial aspect of HB 676 involves the potential for the noncompetitive sale of an estimated 1.5 million acres of isolated sections of state land.
HB 676 would also close the Montana Water Court, a nearly 50-year-old court created to quantify and prioritize hundreds of thousands of water rights that predate Montana’s 1972 Constitution. If HB 676 passes, an existing law specifying that the court cannot alter tribal water compacts would be struck as well. Critics argue it could invite federal intervention in decisions nearing resolution after decades of negotiation and scrutiny. One such agreement is the Confederated Salish and Kootenai Tribes Compact, which is currently before the Montana Water Court.
In their comments to lawmakers, HB 676 proponents referenced a controversial decision the Montana Supreme Court issued last year. They described HB 676 as a private property rights protection measure that will prevent the Montana Department of Natural Resources and Conservation from “stealing” private water rights by dictating that in order to claim ownership of a water right, the water right must be used and diverted on state lands.
At issue is the Schutter v. Montana Land Board ruling the Montana Supreme Court issued in late April 2024 siding with the Land Board. The Land Board, which oversees state trust lands and is comprised of the top elected officials serving in state government, had asserted ownership over a portion of a private water right Gallatin County potato farmers developed on their private land to irrigate both their property and a neighboring property they leased from the state.
In an opinion siding with the Montana Water Court’s interpretation of the matter, Montana’s highest court argued that the state must exercise some ownership over the water right to act in accordance with its directive to “secure the largest measure of legitimate advantage” for state trust land beneficiaries — e.g., Montana’s public schools. State trust lands are sections of land the federal government turned over to the Montana government when it became a state.
The Schutter decision was vigorously opposed by the Senior Ag Water Rights Alliance, which described the DNRC’s stance as “government bureaucracy gone insane.”
Speaking as a member of the Senior Ag Water Rights Alliance on March 21, Jocelyn Cahill described HB 676 as a proposal to put “clarity and stability” into Montana law.
“Many ranchers are afraid to use their water on their state leases, fearing that DNRC will come after their right,” Cahill said. “This uncertainty discourages investment in the infrastructure needed to divert and deliver water. When ranchers stop improving their lease lands, the state leases — and the school trusts that rely on them — lose out on significant benefits.”
Cahill is steeped in water issues in other ways. She recently represented irrigation interests in a water policy stakeholder group that developed legislative proposals over the interim and her politically powerful family recently lost a legal dispute regarding the use of exempt wells to facilitate a Broadwater County development.
Other HB 676 proponents included the Rocky Mountain Stockgrowers Association and the Rocky Fork Decreed Users of Carbon County.
HB 676 opponents argued that the bill is a raw deal for public land access, for Montanans in the midst of the water rights adjudication process, and for public K-12 schools reliant on state trust lands for a healthy and sustainable revenue source.
The Montana Stockgrowers Association, the Montana Farm Bureau Federation, the Montana Water Resources Association, the Montana Quality Education Coalition, the Senior Water Rights Coalition, the Montana Wildlife Federation, the Rocky Mountain Elk Foundation, the Property and Environment Research Center, the Public Land Water Access Association and the Montana chapter of Backcountry Hunters and Anglers spoke in opposition to the measure, along with other groups and individuals.
Matt Leow with Backcountry Hunters and Anglers acknowledged the access challenges posed by isolated sections of state land but argued that the solution is not to create a “fire sale of a state treasure” but rather to “figure out ways to open up public access to our public lands.”
Rocky Mountain Elk Foundation lobbyist Charlie Booher echoed that assessment, arguing that facilitating “the non-competitive sale of state land” is the wrong way to address state land that public recreationists can’t access.
“Over the last six years, Montana [Fish, Wildlife and Parks] and DNRC have worked through the [Public Access Land Agreement] program, as well as through the Block Management program, to open up access to over 1 million acres of state land that is currently isolated,” he told committee members. “We are supportive of that work and wouldn’t want to see it diminished by this bill.”
Brian Thompson with the Senior Water Rights Coalition described the dissolution of the water court as “problematic.”
“The water court has a job to do, and ending somewhat arbitrarily in 2031 leaves a lot of people in a lurch,” Thompson said during a hearing on the measure. “This is a system and a process that we set in place many decades ago. A lot of people’s water rights are dependent upon this system … They’re counting on the system to continue and to work to protect their rights into the future.”
Opponents also argued that losing more than 1 million acres of state land will jeopardize between $5-7 million of revenue annually, much of which supports public schools. They also pushed back on the notion that the state is “stealing” water rights.
Lieutenant Governor Kristen Juras, a former University of Montana law professor with extensive experience in water law, spoke most forcefully on the latter point.
“The state has never and does not assert an ownership of the water used on [private] land. It only asserts the interest on the state trust land, which it’s obligated to do under its fiduciary duty,” said Juras, who was testifying on behalf of Governor Greg Gianforte in his capacity as chair of the Montana Land Board. “It is absolutely not correct that the state Land Board, acting through the Trust Land division of DNRC, is taking anybody’s private trust rights.”
The Senate Judiciary Committee has not yet taken executive action on HB 676.
HOUSE BILL 379
Just after the Senate Judiciary Committee heard testimony on HB 676, the House of Representatives voted to advance House Bill 379, a twice-tabled and later revived measure that sought to combine two existing tools to facilitate the sale of state trust lands to developers.
Lawmakers’ lifeline to HB 379 was short-lived, though. After passing an initial vote on March 21, the measure failed, 42-54, after 10 Republicans flipped their third-reading vote on Monday.
Rep. Larry Brewster, R-Billings, said he was approached by the Forestry and Trust Lands Division of the DNRC to sponsor HB 379. During a Feb. 6 House State Administration Committee hearing on the bill, Brewster described it as a straightforward measure — “nothing slim shady” — that would alleviate Montana’s housing affordability challenges.
The sale of state lands that are “prime” for such residential development — those that communities have grown around, that have access to utilities and are no longer used for grazing, for example — would provide greater financial benefit to state trust beneficiaries like K-12 public schools if the state could enter into a commercial joint venture agreement with developers, Brewster told his colleagues.
Deidra Kloberdanz, who manages the Real Estate Bureau of the DNRC’s Forestry and Trust Lands Division, said HB 379 combines two existing programs under the DNRC’s umbrella — the commercial leasing program and the land banking program — to create a pathway for larger housing developments. The leasing program provides revenue to trust beneficiaries through commercial rent payments. The land banking program, which has been operational for 22 years, allows the DNRC to sell up to 250,000 acres of trust land in order to reinvest in other lands that will provide more financial benefit to trust beneficiaries.
Kloberdanz said the measure would allow a developer to initiate the subdivision and platting process as a property lessee and establish a framework for the later sale of individual home sites through the land banking program. She added that Land Board oversight is baked into the proposal.
“The idea is the state and the developer would be able to share in both the risk and the reward of the project,” Kloberdanz said.
Gale Heide with Habitat for Humanity of Gallatin Valley was HB 379’s other proponent during the committee hearing on the bill. He argued that HB 379 would make the development of state lands for affordable housing developments that groups like his have explored more financially feasible.
“Though I’m not encouraging the state to become real estate investors, you have proven the ability to use careful foresight in preserving your commitment to future generations and a growing education system,” Heide said. “Maybe some day there won’t be enough of Montana to go around, but for now, I think we can work together to create opportunities for working Montanans willing to bear the load with us.”
The measure drew no opponents during its hearing.
Democratic members of the House spoke in opposition to the bill during floor debate last week, arguing that they have concerns about “uncertainty and ambiguity” in the bill, particularly around a transition away from a public auction process to an online sales platform.
By Amanda Eggert for Montana Free Press
Who gets to buy the state land (and close off public access forever)? Just the rich neighbors of the land?