The Lakeside County Water and Sewer District approved Aug. 19 a lease agreement that would provide water to a resort development near Blacktail Mountain. 

If approved by the Montana Department of Natural Resources and Conservation, the five-year agreement with Flathead Friends, also known as Discovery Land Company, would secure temporary water rights allowing the company to move forward with the initial phases of Territory 1889, the planned 350-home development and private golf course on 1,700 acres.

The move drew criticism from concerned residents and advocacy groups, including those who previously filed a lawsuit in district court challenging the development's request from the Montana Department of Natural Resources and Conservation for a water use permit.   

While the original request is tied up in court, the development sought the workaround lease that would allow work to move forward on the project, which has a preliminary plat from Flathead County.  

Under the agreement, the district will lease 125 acre-feet of water, or nearly 41 million gallons, to Territory 1889 for a five-year period, with the option to extend for two additional one-year terms at a rate of $81,500 per year.  

It’s a move, the district said, that is a win-win. The district will profit off water that is unused. At the same time, Territory 1889 will be able to proceed with the initial development phase without having to wait for litigation to unfold. 

“The water is an asset, and this is a way to leverage that asset,” District General Manager Rodney Olson said. “We’ve never monetized it, and it’s just sitting there. So having the ability to monetize that and use it to bring on an additional employee, which ratepayers would not have to pay for, I think is a positive.” 

But during public comment, advocacy groups who are challenging the development’s water right in court expressed concerns that the agreement was rushed and showed favoritism to Territory 1889 and urged board members to table the vote.  

“I’m asking the board to table the lease today, not because a water right lease isn’t feasible, but I think it’s inappropriate at this time,” Lakeside resident Kate Droll said. “The interest of the existing ratepayers and protecting their water supply needs to come before providing this to a new subdivision south of town.” 

Under Montana law, the state owns all surface and ground water. Individual citizens or entities, like Lakeside County Water and Sewer District, can possess a legal right to use the water within state guidelines. In order to establish a water right, for anything from irrigation to drinking water, a party must apply for a Beneficial Water Use Permit through the DNRC.   

The district holds water rights for approximately 635 acre-feet of water per year. The district utilizes 31% of that water, or about 197 acre-feet of water, leaving more than two-thirds of its available water unused.   

Under the agreement, the district would allocate 125 acre-feet of water to Flathead Friends per year for the next five years, with the option to extend up to a total of seven years. This would bring the district’s total water use up to 51% of its water rights.  

Olson acknowledged that the primary risk in the agreement is tying up nearly 20% of its water supply for the next five years but felt confident that the remaining 49% will be sufficient.  

DNRC will have to approve the agreement, a process which could take anywhere from six to 12 months or longer, according to Olson. The process is more streamlined than the one Flathead Friends is currently going through, since the district already has water rights rather than attempting to establish a new one.  

The Lakeside County Water and Sewer District last year applied for a water use permit on behalf of Territory 1889 to divert 249 acre-feet of water annually to the subdivision. While the development will finance and build the water system, the district plans to operate it and hold the water right.  

During the permit application process, advocacy groups including Citizens for a Better Flathead and North Shore Water Alliance, as well as resident Bruce Young, objected to the permit, but DNRC deemed the objections invalid.  

The objectors sued the state agency, alleging that their right to public participation had been violated. In June, Lewis and Clark District Court Judge Michael McMahon agreed that the department officials had likely erroneously dismissed the objections. The judge ruled that any further action should be paused until the lawsuit has been resolved.  

It could be years before a decision is reached in the case, thus delaying the development. In pursuing alternate solutions, the developer approached Lakeside about leasing water rights until the litigation is resolved.   

Initially, Flathead Friends proposed paying $250 per acre-foot, but the district countered with an offer of $500 per acre-foot, which would amount to $62,000 per year in additional revenue. 

The lease payment would be in addition to the rates individual houses pay for water usage, resulting in additional revenue to the district.  

The lease agreement now heads to Flathead Friends to decide whether to accept it.  

Reporter Elsa Ericksen can be reached at 406-758-4459 or [email protected]. If you value local journalism, pledge your support at dailyinterlake.com/support.