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HELENA — Helena will lose more than half of its drinking water supply from Tenmile Creek — the city’s main source of water — unless a water master’s decision is overturned.

The city had filed objections to the conclusions and recommendations of Water Master Hugh McFadden, who in 2011 decided that Helena gave up the right to more than half of its free water from Tenmile Creek because the city didn’t use it. In a second opinion issued last week, McFadden said the city didn’t show him anything new and stood by his initial conclusion.

Helena officials also have objected to McFadden’s decision that the city has illegally supplied water to certain areas, including Nob Hill and Centennial Park, as well as his opinion that limits the city to only filling its two Tenmile reservoirs once a year.

John Rundquist, Helena’s public works director, said McFadden’s report is only another step in the century-old debate and decades-old legal tussle over Helena’s water rights and he’s confident the city will prevail.

Water masters are attorneys with expertise in water rights and are appointed by Montana’s Chief Water Judge to assist the water court judges. If parties file objections to the water master’s findings, the case is either reconsidered by the water master or turned over to a water judge for further proceedings.

“We disagree, of course, with his decision and we will file our objections, which are due Monday,” Rundquist said. “Then this will go to the water court, which is the body that actually will make the decision. It could go beyond that, to the regular court system, if the result isn’t what we want.”

City Manager Ron Alles said he also feels good about the arguments the city made regarding the water master’s ruling.

“We’ll see where it leads us. It’s not a red flag yet,” Alles said. “But obviously, we’re diligently following it.”

Others involved in the ongoing dispute say they’re convinced, however, that the city is wrong. John Bloomquist is an attorney representing Andy Skinner, who has junior water rights on Tenmile, and David Schmidt is a water-rights consultant whose clients also have owned junior water rights. The men said they believe that the water master is righting a long-time historic abuse by the city and his decision will stand.

“I’ve been watching this thing since 1977 and know the city has taken a real draconian approach in taking whatever it wanted,” said Schmidt, who at one point was representing the Schatz family, who offered to sell the city its junior water rights for about $1 million but was rebuffed. “I think they’re just denying the inevitable. They just haven’t paid attention and lost a big chunk of two claims.”

The Schatz water rights are now being marketed by a Bozeman real-estate broker at an asking price of $9.6 million.

In 1903, disputes arose after Tenmile Creek was unable to satisfy all of the water users’ needs. A judge was called in and decreed the water rights, which meant he described the limit and extent of the amount various entities could pull from the stream. As part of that court case, the judge confirmed the city of Helena’s rights to 550 miner’s inches — about 6,170 gallons per minute — from Tenmile.

But the city didn’t have the capacity to transmit the entire amount allocated and in 1919 the water in the one of the transmission ditches became polluted, so most of that water also wasn’t used. In 1948, the city added a new transmission line, and additional improvements have allowed the city to now divert and transmit the entire amount of water it has rights to for Helena residents, which is about 8 million gallons per day.

Junior water users have filed legal challenges to the city’s withdrawals numerous times since the 1903 ruling, and in this most recent case Water Master McFadden agreed with some of the allegations. So he cut the city’s water right from the 550 miner’s inches adjudicated more than a century ago down to about 221 miner’s inches.

McFadden said in his decision that since the city didn’t use the full amount of the water it had a right to use for anywhere from 19 to 29 years, it basically abandoned the claim to that water.

“Sixteen years after the 1903 Decree, the city stopped using over half of its decreed water rights ...” McFadden wrote. “The extent of the city’s use of Tenmile Creek cannot be reduced by half, then be re-established in 1949 without effect on the other water users on the creek.

“If the abandonment statue is applied retroactively to what Helena did, then municipalities generally would have the right to revive water rights which had not been used in decades, to the injury of junior users ...”

He added that Helena could have leased the use of the water to retain its rights, but didn’t, and other appropriators came to rely on the increased flow.

Bloomquist said the ruling cuts the city’s ability to pull water from Tenmile significantly.

“The pipeline that feeds the city has an 8 million gallon per day capacity. The water master cut back their priority water to 3.5 million gallons per day, or roughly over half of their priority water supply,” Bloomquist said. “The critical thing for the city is that’s about what they pull from the system and under the master’s report, they’ve cut it in half.”

Rundquist said the city hasn’t abandoned the water rights and they’ll continue to use the full amount while the matter is being appealed. If that appeal is denied, it would be significant but not insurmountable due to the ability to buy the Missouri River water.

“We would attempt to fill the gap with the Missouri River water, but operationally there initially could be some problems with the service,” he said.

McFadden’s findings go beyond just diverting water from Tenmile Creek. He noted that a 1966 ruling stated the city could not fill Scott Reservoirs more than once a year during spring runoff, and that the city must follow that order.

He also ruled that the city is permitted to divert water in the Chessman Reservoir only during high water flows and to the extent that other water users will not be harmed.

Rundquist said he doesn’t think the water master had a good understanding of how the city of Helena’s water system works when it comes to storing raw water, and that while it’s only filling them once a year, it’s still objecting to McFadden’s findings “based on misunderstandings.”

What might have an even larger impact on the city’s water use and distribution involves technical terms regarding who are the city’s customers under two distinct yet related concepts: “place of use” and “service area.” The latter is the place where the city has legal obligations to furnish adequate and nondiscriminatory water service.

But the place of use is mapped out to show where the city uses water for fire protection, municipal buildings, watering parks and selling water to residential, governmental and business customers within the area directly served by its supply lines.

At a December 2010 hearing, the city introduced numerous place-of-use exhibits, including annexations to the city, but didn’t provide evidence in the form of copies of resolutions by the city commission that formalized the annexations. McFadden added that the city also contended that specifying a place of use for its water claims is a violation of its constitutional rights.

But they haven’t notified the attorney general or other court of the alleged constitutional right violation, so McFadden said he wouldn’t take that argument under consideration. And since the city didn’t provide what McFadden said was documentation of the place of use, he relied on a 1973 document that outlined where city water was used, not properties annexed after that time.

While those properties include places like the core of Helena, the airport, the fairgrounds and Fort Harrison, they don’t include Nob Hill, Centennial Park and other growing areas of Helena.

“We argued that not only did they not have the capacity to convey the water they were claiming, but that over time they had incrementally added onto the system, which meant they had to take more water,” Bloomquist said.