Rattlesnake Creek: $10M asset, water security at stake in Missoula’s takeover effort (February 14, 2015)

Mountain Water Co. wants to keep its water rights on Rattlesnake Creek – even if the city of Missoula succeeds in taking over the local drinking water system.

In a recent motion, the water company asked Missoula County District Court to exclude the Rattlesnake Creek and wilderness dams owned and operated by Mountain from the condemnation effort.

The Rattlesnake system includes reservoirs, easements, property, and water rights, all assets the city is unconstitutionally attempting to take, according to Mountain Water.

Based on the testimony of its own experts, it is not necessary for these assets to be condemned for the city to accomplish its goal of converting a privately owned water system to a municipally owned water system, reads the court brief.

In its argument, Mountain Water pointed to testimony from two experts called by the city of Missoula. But one of them, city-county water quality supervisor Peter Nielsen, said the water rights are critical to the public interest and city’s future water security.

I believe the water rights are the most significant asset, really the only significant asset, that’s left in that Rattlesnake system, Nielsen said.

And the asset could be profitable if sold.

Nielsen said a consultant for Mountain Water suggested the company has excess water rights, and it could sell all the Rattlesnake rights and some groundwater rights for $10 million.

It is a little concerning that a private utility would look to sell off our water rights. That’s our future, Nielsen said.

Mountain Water president John Kappes said he would not be able to address the city’s arguments until the city files a brief in court. However, he said Mountain has no plans to separately sell assets in the Rattlesnake.

Mountain Water has preserved and protected that property for years and has no intention of selling any of those valuable assets, Kappes said.

However, he said the city is failing to prove the Rattlesnake system is necessary to the operation of the water utility, and he said its witnesses agree.

In an eminent domain case in Montana, the plaintiff must show the desired assets are necessary for public use. The city took Mountain Water Co. and owner the Carlyle Group to court last spring to try to force a sale of the water utility to the municipality.

The city’s own experts contend that the Rattlesnake property is not necessary to the operation of the water system, Kappes said in an email. If there is no necessity, there is no right to condemn private property.

The city is simply trying to get something its experts say it does not need and pay nothing for it.

The city of Missoula attempted an eminent domain takeover of Mountain Water in the 1980s, and it lost in the Montana Supreme Court. Mountain’s recent motion notes the Supreme Court found that Rattlesnake Creek was not necessary for operation of the water system.

The court brief also points to testimony from Nielsen.

He (Nielsen) took the conclusions from his report one step further when being deposed; in his deposition, he states flat out that the entire system is unnecessary, reads the brief.

When asked what the Rattlesnake Watershed System was, he (Nielsen) responded by stating, ‘It’s the dams, the lakes, the water rights, the operations facilities, the securities facilities, the pipelines, the valve control structures, everything required until 1983 to deliver water to the water system, the brief said.

That was the year Mountain Water Co. stopped using Rattlesnake Creek as a drinking water source, following an outbreak of giardia. The Missoula aquifer is now the city’s sole source of safe, clean drinking water.

To again utilize Rattlesnake Creek’s water would require construction of a treatment plant.

The brief notes another city witness agreed with Nielsen’s assessment, and it quotes a question and answer with both parties. Here’s the portion the brief pulled from Nielsen’s deposition:

Q: It’s your opinion that the Rattlesnake watershed system, as you have defined it, is not necessary for the operation of the Mountain Water system as currently operating, correct?

A: Right.

Other than the quote from Nielsen, the brief omits any discussion or mention of water rights. Kappes, however, confirmed the motion addresses the entire system, including water rights.

In an interview, Nielsen said his comments about the Rattlesnake system’s lack of value to the utility are due in part to the deteriorated condition of infrastructure, such as dams – and the changed status of the Rattlesnake water rights.

He said Mountain Water transferred those rights to eight municipal wells, and it no longer uses them in the Rattlesnake, although it retained the option of doing so under certain conditions.

The rights are part of the utility, he said, and the community needs them for current and future water use.

Barbara Chillcott, a lawyer for the Clark Fork Coalition, said in the early 1980s, Mountain Water made the case that accessing the Rattlesnake rights via groundwater was the same as drawing from the surface water, given their connection.

That’s the legal status of the rights, she said; the coalition does not have a hydrologic analysis that confirms the connection.

Now, Chillcott said, Mountain Water is trying to demonstrate its surface rights could be used in creative ways to provide mitigation water for new development in the Bitterroot watershed.

Karen Knudsen, director of the local water-quality watchdog group, said it would be a beast of a process, but it could probably be done.

Knudsen said the coalition has been concerned about Mountain Water stripping water rights from the utility since global equity firm Carlyle bought the company in 2011. Critical decisions about water should be made based on community needs, not on maximum profit, she said.

Our question is, what good is a public drinking water utility without water rights? These water rights need to stay in the community, Knudsen said.

Kappes declined to address the status of Mountain’s Rattlesnake water rights, other than to say none of the individual assets are for sale.

Trial in the eminent domain case is set for March 18.

In the meantime, Algonquin Power and Utilities Corp. of Canada has proposed to purchase Mountain Water and its sister water companies in California from Carlyle.

The sale is pending with the Montana Public Service Commission and the California regulatory agency.

Source: Keila Szpaller, The Missoulian