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The U.S. Supreme Court on Monday set a Jan. 10 hearing date on Montana's claim that farmers in Wyoming are taking too much of the region's scarce water supply.
Montana sued its southern neighbor in 2007, saying it was violating a 1950 deal to share the water of the Yellowstone River and its tributaries. The lawsuit alleges that Wyoming industries are depleting two Yellowstone tributaries -- the Tongue and Powder rivers.
The outcome could have far-reaching consequences for the region's farmers, who rely heavily on the rivers due to an arid climate. The case is also being closely watched by energy companies in Wyoming that pump vast volumes of water from underground aquifers to free up trapped natural gas.
Monday's announcement of oral arguments in the case comes after a court-appointed "special master" shot down several of Wyoming's arguments for dismissal.
Special Master Barton Thompson, a Stanford University water-law expert, said in a February interim report to Justices that Montana has grounds to sue over Wyoming's expanded use of water since 1950.
However, Thompson rejected Montana's claim that Wyoming should be held liable for increased water use due to irrigation improvements.
Montana Attorney General Steve Bullock, who challenged Thompson's finding, said Monday that those changes in irrigation can't be ignored.
Through older methods like flood irrigation, 35 percent of water used by agriculture eventually flows back into a river. That percentage drops sharply when modern sprinklers are used.
"A lot less water returns back to the river, which means a lot less water ultimately flows into Montana for us to use," Bullock said.
Attorneys for Wyoming have argued that much of the water used by the state's residents and businesses was not covered by the 1950 agreement, known as the Yellowstone River Compact.
Montana has never quantified how much water it believes Wyoming to be using. Bullock said that would come after Justices decide on the legal issues in the case.