Municipalities, farmers, ranchers, landowners, and conservation groups unite to protect Montana water rights in challenge to “exempt well loophole”

Helena, Montana — Today, groups and individuals representing a diverse coalition of
municipalities, farm and ranch families, landowners, and conservation organizations filed a legal
challenge in Montana state court against the Montana Department of Natural Resources and
Conservation (DNRC) and the state of Montana over its continued implementation of the state’s
“exempt well loophole,” which allows unregulated groundwater development outside the state’s
permitting system. The lawsuit seeks to protect Montana’s senior water rights holders and
restore fairness and accountability to the state’s water administration system.
In a state where water is a limited and vital resource, Montana law guarantees that senior
appropriators, those with older, established rights, are first in line to use available water.
However, the exempt well loophole has allowed developers to drill thousands of new
groundwater wells without permits, even in basins that are legally closed to new appropriations.
The unchecked proliferation of these wells has reduced streamflows, impaired senior water
rights, and undermined the state’s constitutional obligation to manage and protect Montana’s
waters for the benefit of its people.
In 2016, the Montana Supreme Court ordered the DNRC to narrow this loophole, which had
allowed developers to drill thousands of wells outside the state’s permitting process. Despite
that ruling, the number of unregulated wells has skyrocketed over the past decade as the state
has failed to adopt meaningful policies to rein in abuse of the exemption, leading to today’s
constitutional challenge to the underlying, fundamentally flawed Exempt Well Law itself.
The lawsuit, filed in Lewis and Clark County, challenges § 85-2-306(3)(a)(iii), MCA (the “Exempt
Well Law”), on several constitutional grounds. Plaintiffs allege the law:
● Violates Article II, Section 3 and Article IX, Section 3, which protect existing water
rights and requires the state to ensure that senior appropriators are not impaired by
new water uses.
● Violates Montanans’ rights to equal protection and due process under Article II,
Sections 4 and 17, by granting exempt well users preferential access to water over
law-abiding senior rights holders.
● Violates the public’s right to know and participate in government decisions under
Article II, Sections 8 and 9, by allowing tens of thousands of wells to be approved
without public notice, transparency, or review.
The plaintiffs, a coalition including Montana League of Cities and Towns, Association of Gallatin
Agricultural Irrigators, Clark Fork Coalition, Montana Environmental Information Center,
Montana Farm Bureau Federation, Trout Unlimited, and individual landowners, represent
Montanans from every corner of the state whose livelihoods, communities, and local economies
depend on fair and sustainable water management. Together, they seek a declaration that the
Exempt Well Law is unconstitutional, and an injunction preventing the state from continuing to
allow unpermitted groundwater development that harms existing water users.

“The exempt well loophole forces cities and towns to shoulder the consequences of unregulated
groundwater use,” said Kelly Lynch, executive director of Montana League of Cities and
Towns. “Municipalities are already struggling to ensure reliable water supplies for growing
communities. We need a consistent, lawful permitting process that protects existing users, not a
system that leaves Montana’s communities and taxpayers to clean up the mess.”

“Farmers and ranchers have followed the rules and invested generations of work based on
secure access to water,” said Scott Kulbeck, executive vice president of the Montana Farm
Bureau Federation. “Everyone has to play by the same rules. When some folks skip the permit
process and pull from a water source that’s already spoken for, it hurts their neighbors. This
case is about protecting the way Montanans have managed water responsibly for generations.”
“For irrigators, water is the foundation of our livelihoods,” said Kurt Dykema, board president
of the Association of Gallatin Agricultural Irrigators. “When thousands of new wells are
drilled with no regard for senior rights, it’s not just a paperwork or data problem, it’s a real-world
impact on our ability to grow crops and feed our communities. We’re simply asking the state to
follow the Constitution and the prior appropriation doctrine.”

“From rapid growth to ongoing drought, Montana’s water resources and water users are facing
unprecedented challenges,” said Andrew Gorder, legal director of the Clark Fork Coalition.
“The cumulative impact of over one hundred thousand exempt groundwater wells can no longer
be ignored. We’re asking the court to conserve our limited water resources and ensure that the
constitutional protections afforded to senior water rights, including instream flow rights, are
preserved.”

“Healthy rivers and thriving fisheries depend on water staying in our streams,” said Pat Byorth,
Montana water director for Trout Unlimited. “When thousands of new wells are drilled without
accounting for their cumulative impact, it’s Montana’s trout streams, ranchers, and communities
that pay the price. This case is about protecting the fairness and integrity of Montana’s water
law so that all users — past, present, and future — can depend on a sustainable water supply.”
“Montanans have a right to know how their water is being used and a fair chance to participate
in decisions that affect their communities,” said Laura Collins, sustainable communities
director at the Montana Environmental Information Center.

“For too long, the state has allowed large-scale water use to occur through the exempt well loophole. This case is about restoring transparency, accountability, and the constitutional protections that ensure every Montanan has a voice in managing our most vital resource.”

“Exempt wells facilitate a housing development model and pattern that is unsustainable,” said
Mark Runkle, a Montana housing developer. “It transfers many of the developer’s
responsibilities to future homeowners and taxpayers. This model undermines responsible
development on municipal services with infrastructure completed and undermines the
affordability of housing. These pseudo-urban clusters benefit only the few to the detriment of all
others.”
“We did everything the law asked of us to protect our water and our neighbors’ water —
collecting data, hiring experts, and working hand-in-hand with the state,” said Kevin Chandler,
a hydrogeologist who ranches outside of Absarokee. “In our case, it’s frustrating to see a
subdivision using dozens of exempt wells get approved, when the same development proposing
a single shared community well would have been denied. Those community systems are more
efficient and safer, and their use can be measured and monitored. The current policy promotes
poorly planned development and passes the hidden costs to future homeowners, counties, and
towns.”
Exempt wells do not facilitate affordable housing; they subsidize a development model of
low-density housing that removes incentives for on-system, dense development. Reliance on
exempt wells since 1973 has not solved the affordability crisis; in fact, in 2024 the National
Association of Realtors ranked Montana’s housing market the least affordable nationwide.
Eliminating the exempt well loophole in its current form will lead to more affordable homes by
increasing density and spreading costs among more system users for more Montanans who are
being increasingly squeezed by the housing market.
Responsible growth is possible — and it starts with smart water policies. New homes can and
should be served by community or municipal water systems that are more efficient, affordable,
and accountable. Developers already have workable tools under Montana law: connecting to
existing city water systems, building shared community wells that are properly permitted and
monitored, and–when required–developing mitigation plans that offset impacts to other water
users and streamflows. These existing solutions promote smarter land use, protect the state’s
limited water supplies, and help avoid costly future conflicts over water.
For decades, local governments, water users, and conservation organizations have called on
the state to close the exempt well loophole. Today’s lawsuit follows the exhaustion of all
legislative avenues and administrative inaction, and seeks to ensure that Montana fulfills its
constitutional duty to protect senior water rights.
The firm of Franz and Driscoll, PLLP, represents Montana League of Cities and Towns,
Association of Gallatin Agricultural Irrigators, Montana Farm Bureau Federation, and Mark
Runkle. The Western Environmental Law Center represents the Clark Fork Coalition, Montana
Environmental Information Center, and Kevin and Katrin Chandler.
Background:
The exempt well provision was first adopted in 1973 to allow small domestic and agricultural
users to drill limited-capacity wells without a permit. In 1987, the legislature clarified that multiple
wells drawing from the same source could be considered a “combined appropriation” subject to
DNRC permitting. However, a 1993 DNRC rule narrowed this definition, allowing multiple
unconnected wells to evade permitting so long as they were not physically plumbed together.
This loophole spurred decades of legal and legislative debate. In 2014, the First Judicial District
Court in Clark Fork Coalition v. Tubbs struck down DNRC’s narrow interpretation of “combined
appropriation,” holding that it violated legislative intent and enabled large-scale, unpermitted
water use. The Montana Supreme Court upheld that ruling in 2016, directing DNRC to apply the
exemption strictly and ensure that only truly de minimis uses remain unpermitted.
Despite these rulings, DNRC and the state have not enacted regulatory or legislative reforms to
address the continued overuse of the exemption. As a result, thousands of new exempt wells
have been drilled in the past decade, particularly in the Gallatin, Bitterroot, Upper Missouri, and
Clark Fork Basins — regions already designated as fully appropriated and which have
experienced significant declines in streamflows.

–Montana Farm Bureau Federation