May 6, 2014 John W. Colledge III Merrill Bradshaw

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Irrigation District Creation District and Joint Board Talking Points

Applicable Montana Irrigation District Laws And

CSKT v. Department of the Interior, et. al., Case 9:14-cv-00044-DLC, COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

Flathead Indian Irrigation Project (FIIP)

Introduction Research into Title 85, Chapter 7, Irrigation District Laws, Montana Code Annotated (MCA) revealed that the three irrigation districts and the defunct Flathead Joint Board of Control (FJBC) on the Flathead Indian Reservation that are part of the FIIP have not, do not, and cannot currently perform key elements of their duties related to the apportionment and delivery of water and the ownership, operation and maintenance of the FIIP system. The districts, and particularly any joint board of control, are redundant and unneeded layers of government. The duties of the former Cooperative Management Entity and the proposed Unitary Management Board found in the draft Water User Agreement more closely resemble those of a joint board of control as defined in the MCA than the defunct FJBC, or any possible successor board that may be formed in the near future. Key Elements -- Montana Irrigation Laws

District Creation

60% of title-holders to land and water rights to be included in an irrigation district.

Requires a written report or opinion from the department of natural resources and conservation

on the engineering features involved and the possibilities of water supplies, accompanied by a copy of the decree of the district court showing the adjudicated water rights in said streams from which said waters are to be diverted.

Duties of district and joint board commissioners

Apportionment and distribution of water.

Protection and preservation of the works and other property of the districts.

Operation and maintenance of irrigation and/or drainage works and the delivery of water

therefrom.

Joint Board -- for the sole purpose of making it possible for one or more irrigation districts to function jointly through a central control agency for the purpose of efficiency, simplicity, and economy.

Key Elements -- CSKT v. Department of the Interior, et. al., (includes the Jocko Valley, Mission and Flathead Irrigation Districts) Case 9:14-cv-00044-DLC, COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF, filed February 27, 2014.

CSKT noted that the three irrigation districts on the Flathead Indian Reservation do not operate, manage or maintain the irrigation system known as the FIIP.

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Appropriations of water were made by agents of the Secretary of the Interior.

State irrigation laws do not apply to trust land or land owned by individual Indians. Current Situation for the Flathead, Mission and Jocko Valley Irrigation Districts

The three districts do not own, operate or maintain any part of the FIIP.

The three districts and the defunct FJBC did not, and do not, apportion or distribute water.

The CSKT formally recognized that key duties of irrigation districts and joint boards of control as defined in in Title 85, Chapter 7, MCA are not performed by the three irrigation districts.

The three districts do perform basic administrative functions defined in the MCA.

o Set administrative fees.

o Litigate.

o Submit annual financial reports to the county recorder.

o Interface with the county treasurer to pay for FIIP operations and maintenance.

o Interface with county elections officials to conduct irrigation district elections.

Irrigator information originates from the FIIP and was previously transmitted to

the defunct FJBC.

County elections officials perform little or no due diligence in data verification.

The three irrigation districts and former FJBC have, however, consistently demonstrated their statutory authority to litigate.

Legal counsel retainer fees for the three districts and the former FJBC totaled more than

$1,700,000 from 2000 through 2013, approximately 50% of FJBC budget (Lake County Clerk and Recorder files).

The Flathead and Mission Irrigation Districts are likely to proceed with the organization of another

joint board of control that cannot perform the basic water apportionment, delivery, operations and management duties found in the MCA.

Recommendations

Introduction The Montana Legislature must address the irrigation district laws. The Montana Irrigation laws were largely written in the early 20th century with few modifications since. In addition, there has been limited judicial interpretation of those laws. It is apparent when reading those laws they were mostly intended to implement irrigation districts where the works were constructed and initially administered by the Bureau of Reclamation for the benefit of homesteaders and not projects built for the benefit of Native Americans. The unique situation of irrigation districts on the Flathead Indian Reservation and the FIIP were not clearly and adequately included in the Montana irrigation district laws. This has resulted in frustration with many matters that cannot be adequately solved within the existing statutory framework.

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The matter of the Water Compact negotiations in Western Montana further complicates the existing statutory language. References, often without specific citation, are made to Montana law(s) in relation to irrigation districts and the defunct FJBC. Absent from those references has been discussions of the lack of authority to perform the most important duties of an irrigation district and joint board of control apportionment and delivery of water and the operation and maintenance of the works to ensure that water reaches irrigators. With, or without the approval of the Compact, the antiquated language in the irrigation district laws will at minimum continue to prioritize litigation over delivery of water on the Flathead Indian Reservation and perhaps in other locations in Montana. Specific Recommendations

Establish and fund a joint legislative committee to examine and report on the current irrigation district statutes.

Ensure particular scrutiny in the context of applicability of current statutes on the Flathead Indian Reservation.

o Apportionment and delivery of water.

o Ownership, operation and maintenance of the FIIP.

o Separate agreement or compact with the CSKT eliminating irrigation districts and codify

the Unitary Management Board as a joint board of control specific to the circumstances and needs of irrigators on the Flathead Indian Reservation.

Revisit irrigation district voting, specifically examining the constitutionality of weighted voting and

voting methods in other western states.

Draft appropriate legislative changes.

Transparency in all facets of this process

Create legislation to allow tract owners to opt out of districts

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References 85-7-101. Creation of irrigation districts by percentage of titleholders. (1) Sixty per centum in number of the holders of title or evidence of title to lands sought to be included in an irrigation district and which are susceptible of irrigation, such holders of title or evidence of title also representing 60% of the acreage of said lands, may propose the establishment and organization of an irrigation district under the provisions of this part and part 15.

(2) Irrigation districts may be formed in order to cooperate with the United States under the federal reclamation laws heretofore or hereafter enacted or under any act of congress which shall permit of the performance by the United States of work in this state for the purposes of construction of irrigation works, including drainage works, or for purchase, extension, operation, or maintenance of constructed works or for the assumption, as principal or guarantor, of indebtedness to the United States on account of district lands. 85-7-103. Report by department of natural resources and conservation required. (1) Before any such district shall be established, there shall be presented to the district court, at the hearing on the petition for such establishment, a written report or opinion from the department of natural resources and conservation on the engineering features involved and the possibilities of water supplies, accompanied by a copy of the decree of the district court showing the adjudicated water rights in said streams from which said waters are to be diverted. 85-7-201. Creation of districts by owners of water of adjudicated streams. It is the purpose and intention of this part, in the furtherance of public welfare, to provide an effective public agency for the improvement, development, and maintenance of certain existing irrigation systems in cases where administration thereof, through the agency of a water commissioner and the existing statutes, is not effective. 85-7-207. Part not to conflict with other regulations. This part is not intended to conflict in any way with present statutes governing the appointment and duties of water commissioners on adjudicated water right streams or the operation of statutes as to the jurisdiction of courts over such commissioners and water rights and distribution of water under court decree but is for the sole purpose of making it possible for users of water out of decreed water right streams to improve the stream channel and conserve water in the best possible manner through the agency of an irrigation district, as provided for in this part. 85-7-301. Creation of district by owners of rights in common water supply. (1) It is a purpose and intention of this part, in the furtherance of the public welfare, to provide an effective public agency for the improvement, development, operation, maintenance, and administration of certain existing irrigation systems in cases where administration thereof through the agency of a water commissioner is not effective. 85-7-303. Establishment of district. Whenever the owners of land and water rights, situated as described in 85-7-302, desire to organize for the purposes mentioned in this part, such owners may propose the establishment and organization of an irrigation district under the provisions of this chapter, except part 2, insofar as such laws are applicable hereto and not in conflict with the purposes and provisions of this part. 85-7-305. Apportionment of water by commissioners. The board of commissioners shall apportion the water for irrigation among the lands of the district in a just and equitable manner and in compliance with the decree adjudicating the rights thereto, but the maximum amount apportioned to any land shall be the amount that can be beneficially used thereon. 85-7-306. Development of water supply -- levy for expenses. The board of commissioners of such irrigation district shall have authority to develop the source of supply and increase the means of distribution of water to the end that all owners of water rights under the system shall receive the amount

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of water which can be beneficially used upon their lands within the district. The board may levy against each irrigable acre of land in the district on account of administrative expenses, cost of maintenance and repairs, development of water supply, or enlargement of distribution facilities. 85-7-1402. Definitions. As used in this part, unless the context requires otherwise, the following definitions apply: (1) "Irrigation district" means a district created pursuant to Title 85, chapter 7, part 1. (2) "Issuer" means the board of commissioners of an irrigation district or a board of control created pursuant to Title 85, chapter 7, part 16. (3) "Revenues" means any fees, charges, rates, rents, or lease payments. (4) "Undertaking" means any one or a combination of the following: (a) water sources, water rights, irrigation canals, irrigation systems, including pumping facilities or gravity measure systems, reservoirs, reservoir sites, or small power production facilities that are: (i) certified as such by the federal energy regulatory commission; and (ii) are associated with federal reclamation projects; (b) any real or personal property or water rights related to or necessary to provide, operate, and maintain an undertaking listed in subsection (4)(a). 85-7-1602. Election on joint operations. At any time after March 7, 1959, in the event that it is deemed advisable or desirable for any irrigation districts to operate under the direction of a board of control as herein provided, the boards of commissioners of the districts, after petition requesting the same be received and filed with them, must call an election to put the question before the landowners of the districts which are petitioned to be joined. In the event a majority of the landowners of each district, as provided by 85-7-1710, vote for organizing such board of control, then the commissioners of each district will be authorized and directed to enter into such contract to operate the districts in accordance with the terms of this part as provided by 85-7-1601. The election herein provided shall be conducted in the same manner and the same persons shall be entitled to vote thereat as provided for elections of commissioners of irrigation districts, in accordance with 85-7-1702, 85-7-1710, and 85-7-1712. 85-7-1604. Validity of joint operations under earlier agreements. Any contract previously entered into between any two or more irrigation districts or between any such irrigation districts and the United States bureau of reclamation which meets the requirements of this part and which creates a board of control meeting all the requirements of this part is hereby declared to be a valid contract and to create a valid board of control under this part. 85-7-1605. Purpose. This part is not intended to conflict in any way with statutes governing irrigation districts but is for the sole purpose of making it possible for one or more irrigation districts to function jointly through a central control agency for the purpose of efficiency, simplicity, and economy. 85-7-1612. Board of control -- powers and duties. (1) The board of control established by this part is the operating agent of the contracting districts for the operation and maintenance of irrigation and/or drainage works and the delivery of water therefrom. (2) The board shall make and execute all necessary contracts; employ and appoint such agents, officers, and employees as may be required; and prescribe their duties. (3) The board may institute and maintain any and all actions and proceedings and suits at law or in equity, necessary or proper in order to fully carry out the provisions of this chapter or to enforce, maintain, protect, or preserve any and all rights, privileges, and immunities created by this part or acquired in pursuance thereof. In all courts, suits, or proceedings, the board may sue, appear, and defend in person or by its attorneys and in the name of such board of control. (4) The board may adopt rules and bylaws governing the calling and holding of meetings of the board; the manner of transacting business thereat; and the publishing or posting of the orders, resolutions, and proceedings of the board. The board shall pass or adopt bylaws and rules for the apportionment and distribution of water to the lands of the contracting districts and for the protection and preservation of the works and other property of the districts. All orders and resolutions shall be passed or adopted by a majority of the members of the board of control by a "yea" and "nay" vote, to be entered upon the records

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of the board. (5) The board of control may perform all other acts necessary or appropriate to fully carry out the purposes of this part. (6) The board of control may plan, acquire, construct, operate, maintain, lease, or finance an undertaking through the issuance of revenue bonds, as provided in part 14 of this chapter.

85-7-1831. Withdrawal of lands to organize separate or consolidated district for cooperation with federal projects -- petition. (1) Whenever the holders of title or evidence of title to a part of the lands of an irrigation district organized and existing under the provisions of 85-7-101 through 85-7-103, which lands lie within and are served by an irrigation and/or drainage project constructed, operated, and maintained by the United States, desire a separation of said lands from said irrigation district for the purpose of forming a new district or combining with another existing district in order to cooperate with the United States as provided in 85-7-101 through 85-7-103, said separation, organization of a new district or combination with another existing district may be effected by petitioning the district court of the county in which the lands of the district or the greater portion thereof are situated for an order or decree changing the boundaries of the district by the elimination therefrom of such lands and their incorporation in another existing district or in a new and separate district. (2) Such changes shall not otherwise impair or affect the organization of the district now including said lands or its rights in or to property or any of its rights or privileges of whatsoever kind or nature, nor shall it affect, impair, or discharge any contract, obligation, lien, or charge for or upon which it was or might become liable or chargeable had such changes not been made.

85-7-1902. Management of district by board. (1) The board of commissioners of every irrigation district established and organized under and by virtue of parts 1 and 15 of this chapter shall constitute the corporate authority of said district. (2) The board shall have the power and it shall be the duty of the members thereof to manage and conduct the business and affairs of the district; adopt a corporate seal therefor; make and execute all necessary contracts; and employ and appoint such agents, officers, and employees as may be required and prescribe their duties. (3) The board is hereby authorized and empowered to institute and maintain any and all actions and proceedings, suits at law or in equity, necessary or proper in order to fully carry out the provisions of this chapter, or to enforce, maintain, protect, or preserve any and all rights, privileges, and immunities created by this chapter or acquired in pursuance thereof. In all courts, suits, or proceedings, the board may sue, appear, and defend in person or by attorneys and in the name of such irrigation district. (4) The board may adopt rules and bylaws governing the calling and holding of meetings of the board; the manner of transacting business thereat; and the publishing or posting of the orders, resolutions, and proceedings of the board. It shall be the duty of said board to pass or adopt bylaws and rules for the apportionment and distribution of water to the lands of the district and for the protection and preservation of the works and other property of the district, and the board may therein require the prompt payment of all current and delinquent taxes and assessments and other financial obligations owing the district as a prerequisite to water service. The bylaws and rules shall be printed in convenient form for distribution in the district. All orders and resolutions shall be passed or adopted by a majority of the commissioners by a yea and nay vote, to be entered upon the records of the board. (5) Said board shall have power generally to do and perform all such other acts as shall be necessary or appropriate to fully carry out the purposes of this chapter.

85-7-1911. Apportionment of water by board. (1) The board of commissioners shall apportion the water for irrigation among the lands in the district or a subdistrict in the district in a just and equitable manner, and the maximum amount apportioned to any land shall be the amount that can be beneficially used on the land. The amount of water is appurtenant to the land and inseparable from it but subject to reduction as provided in this chapter. (2) In the event of a shortage of water, the amount of water delivered to each particular tract or piece of land shall be reduced proportionately. (3) All surplus water belonging to the district may be sold or disposed of by the board for the benefit of

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the district or for the benefit of a subdistrict if the surplus water is derived from water that attaches to the substantial benefit of the subdistrict. (4) All water, the right to the use of which is acquired by the district under any contract with the United States, shall be distributed and apportioned by the district in accordance with the acts of congress, the rules and regulations of the secretary of the interior, and the provisions of the contract. CSKT v. Department of the Interior, et. Al., (includes the Jocko Valley, Mission and Flathead Irrigation Districts) Case 9:14-cv-00044-DLC, COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF, filed February 27, 2014. 8. The Defendant irrigation districts do not operate, manage or maintain FlIP nor do they employ any equipment, people or entity to do so.

19. The Tribes seek a declaration of the ownership of irrigation water that is collected, stored, diverted, and delivered by the Flathead Indian Irrigation Project of the Bureau of Indian Affairs, United States Department of Interior

79. Certain non-Indian water users filed a Petition in the Fourth Judicial District of the State of Montana, in and for the Counties of Lake and Sanders (now the Twentieth Judicial District) under the caption "IN THE MATTER OF THE FORMATION OF THE FLATHEAD IRRIGATION DISTRICT to the Honorable Judge of the District Court, State of Montana" seeking an Order creating the Flathead Irrigation District.

80. In the third numbered paragraph of the Petition to form the Flathead Irrigation District, the petitioners acknowledged that, [a]ppropriations of the waters having been made for such purposes by the agents of the Secretary of Interior, pursuant to Federal Law, as aforesaid, and for the purpose of conveying and distributing the water to its place of use, the irrigation works have been constructed by the United States.

81. Subsequently, a State District Court issued three orders creating the three irrigation districts named as Defendants in this Complaint. All three Defendant irrigation districts filed similar petitions and all were similarly decreed. For purposes of simplicity in the Complaint, the Tribes will use the record on the Flathead Irrigation District as an example to represent all three irrigation districts named in this Complaint.

82. The State District Court Order establishing the Flathead Irrigation District, dated August 26, 1926, acknowledged the Petition addressed above as the basis for the Order and made the following conclusions:

(1) confirmed the District's assertion in its Petition that the FlIP was built by the United States

(Petition p. 4); (2) confirmed the District's assertion, contained in its Petition, that "appropriation of the water

having been made for such purpose by the agents of the Secretary of Interior, pursuant to federal law as aforesaid, and for the purpose of conveying and distributing the water to its place of use (Petition at p. 5); and (3) provided numerous pages of legal land descriptions as those lands to be included within the Flathead Irrigation District.

83. The State District Court Order creating the districts did not grant water rights to the irrigation districts or any individual or other entity.

84. The August 26, 1926 State District Court Order establishing the Defendant Flathead Irrigation District specified at page 5 that, appropriation of water having been made for such purpose by the agents of the Secretary of Interior, pursuant to federal law as aforesaid, and for the purpose of conveying and distributing the water to its place of use, the irrigation works having been partially constructed by the United States. (Emphasis added).

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85. The August 26, 1926 State District Court Order establishing the Defendant Flathead Irrigation District, reiterated that the United States built FlIP and appropriated water for it under federal law. That Order also specified that the district was created within the pre-existing FlIP system for the purpose of assumption of the debt for construction which individual irrigators have never paid.

86. The State District Court Orders establishing the three Defendant irrigation districts all demonstrate the following points:

(1) that the new districts have been formed within the pre-existing federal FlIP system years after

FlIP had been established and been delivering irrigation water to lands now identified as district lands;

(2) that the United States had previously appropriated water for use under FlIP under federal law;

(3) that state irrigation law does not apply on trust land whether Tribally owned or owned by individual Indians; and

(4) that the Districts were formed to create legal entities that the United States could hold

accountable for the individual irrigator's ongoing failure to pay their costs attributable to irrigation.