Bloomberg News

Power Companies Win U.S. High Court Clash Over River Rights

February 27, 2012

(Updates with reaction starting in 11th paragraph.)

Feb. 22 (Bloomberg) -- The U.S. Supreme Court sided with power and mining companies against states and environmentalists in a clash over the rights to rivers explored two centuries ago by Lewis and Clark.

The justices unanimously overturned a ruling that would have required a unit of PPL Corp. to pay more than $50 million in rent to Montana for the use of riverbeds under ten of the energy company’s dams.

The ruling puts new limits on state claims to ownership of the rivers within their borders, modifying legal rules that date back to the American Revolution. The court said states don’t own major waterfalls and other river segments that weren’t navigable at the time of statehood.

For companies with facilities on rivers, the decision lifts a legal cloud. Companies had said a ruling favoring Montana might have let other western states make similar rent demands. Environmental groups had said a victory for PPL in the case would weaken the ability of states to protect fisheries, river ecosystems and recreation areas.

The dispute centered on hydroelectric dams on the upper Missouri, Madison and Clark Fork rivers. Meriwether Lewis and William Clark explored the area during their 1804-06 expedition, and their journals provided fodder for the legal case.

Great Falls Dispute

Both sides pointed to the exploration party’s decision to take a 17-mile land route around a series of Missouri River waterfalls known as Great Falls and re-enter the water upstream. PPL said that trip showed that Great Falls wasn’t passable, while the state countered that the river, taken as a whole, was navigable.

A Montana state trial court ordered the company to pay $40 million in past rent, plus an unspecified amount for rent starting in 2008. PPL Montana in 2010 recorded a pretax charge of $56 million to cover estimated payments through the first quarter of 2010. The company has said that its total accrued loss from the case as of Sept. 30, 2011, was $84 million.

The Montana Supreme Court had said the state owns the riverbeds and is entitled to rent payments. The company said the riverbeds are owned either by private parties or the federal government.

Justice Anthony Kennedy wrote the Supreme Court’s decision today reversing the Montana court ruling.

PPL Rises

PPL, based in Allentown, Pennsylvania, rose 27 cents to $28.55 at the close in New York. The shares climbed as high as $28.72, rising 44 cents, or 1.5 percent, after the court issued its ruling.

“The highest court in the land has affirmed PPL Montana’s long-held position that non-navigable stretches of riverbed lands are not owned by the state,” said Robert L. Grey, PPL’s general counsel, in a statement.

Montana Attorney General Steve Bullock said the state would try to press ahead with the case at the lower court level. The high court ruling left open that possibility.

“From the beginning, this case has been about whether PPL pays its fair share for use of our rivers for hydroelectric power,” Bullock said in a statement.

PPL was represented in the case by Paul Clement, the lead lawyer for 26 states challenging President Barack Obama’s health-care law.

The case is PPL Montana v. Montana, 10-218.

--Editors: Justin Blum, Steven Komarow

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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