(CN) - Montana cannot collect $41 million in rent for a power company's use of riverbeds, the Supreme Court ruled Wednesday, saying the state has not proved navigability for title ownership.
A trial court must determine whether disputed river tracts were navigable at the time the state joined the union in 1889, for a constitutional test that determines whether the section is navigable for title purposes, the justices found.
For now, it is uncertain how the Missouri, Madison and Clark Fork rivers will stack up under the correct navigability test , but it is a welcome decision for wholesale electric generator PPL Montana after it was ordered to pay the state nearly $41 million for maintaining hydroelectric power sites on the riverbeds from 2000 to 2007.
The state Supreme Court affirmed that finding on March 30, 2010, in a 107-page decision
On Wednesday, the U.S. Supreme Court devoted just 26 pages to upending that order. Justice Anthony Kennedy spent one-sixth of the unanimous opinion recounting the histories of each of the three rivers at issue.
"PPL's power facilities have existed at their locations for many decades, some for over a century," he wrote. "Until recently, these facilities were operated without title-based objection by the state of Montana. The state was well aware of the facilities' existence on the riverbeds - indeed, various Montana state agencies had participated in federal licensing proceedings for these hydroelectric projects. Yet the state did not seek, and accordingly PPL and its predecessor did not pay, compensation for use of the riverbeds. Instead, the understanding of PPL and the United States is that PPL has been paying rents to the United States for use of those riverbeds, as well as for use of river uplands flooded by PPL's projects."
In another sixth of the opinion, Kennedy explained the British foundation for the U.S. law that gives the states title to riverbeds under navigable waters.
He then found that the Montana Supreme Court mishandled the question of river segments and overland portage. A segment-by-segment approach is the proper method to determine title, but the state high court rejected it as "a piecemeal classification."
"The segment-by-segment approach to navigability for title is well settled, and it should not be disregarded," Kennedy wrote. "A key justification for sovereign ownership of navigable riverbeds is that a contrary rule would allow private riverbed owners to erect improvements on the riverbeds that could interfere with the public's right to use the waters as a highway for commerce. While the federal government and states retain regulatory power to protect public navigation, allocation to the state of the beds underlying navigable rivers reduces the possibility of conflict between private and public interests. By contrast, segments that are nonnavigable at the time of statehood are those over which commerce could not then occur. Thus, there is no reason that these segments also should be deemed owned by the state under the equal-footing doctrine."
Concluding that the Montana Supreme Court based its decision on an "infirm legal understanding of this court's rules of navigability for title under the equal-footing doctrine," the justices reversed and remanded the case to determine navigability.