Helena, Montana — Today, groups and individuals representing a diverse coalition of municipalities, farm and ranch families, landowners, and conservation organizations filed a legal challenge in Montana state court against the Montana Department of Natural Resources and Conservation (DNRC) and the state of Montana over its continued implementation of the state’s “exempt well loophole,” which allows unregulated groundwater development outside the state’s permitting system. The lawsuit seeks to protect Montana’s senior water rights holders and restore fairness and accountability to the state’s water administration system.
In a state where water is a limited and vital resource, Montana law guarantees that senior appropriators, those with older, established rights, are first in line to use available water. However, the exempt well loophole has allowed developers to drill thousands of new groundwater wells without permits, even in basins that are legally closed to new appropriations. The unchecked proliferation of these wells has reduced streamflows, impaired senior water rights, and undermined the state’s constitutional obligation to manage and protect Montana’s waters for the benefit of its people.
In 2016, the Montana Supreme Court ordered the DNRC to narrow this loophole, which had allowed developers to drill thousands of wells outside the state’s permitting process. Despite that ruling, the number of unregulated wells has skyrocketed over the past decade as the state has failed to adopt meaningful policies to rein in abuse of the exemption, leading to today’s constitutional challenge to the underlying, fundamentally flawed Exempt Well Law itself.
The lawsuit, filed in Lewis and Clark County, challenges § 85-2-306(3)(a)(iii), MCA (the “Exempt Well Law”), on several constitutional grounds. Plaintiffs allege the law:
● Violates Article II, Section 3 and Article IX, Section 3, which protect existing water rights and requires the state to ensure that senior appropriators are not impaired by new water uses.
● Violates Montanans’ rights to equal protection and due process under Article II, Sections 4 and 17, by granting exempt well users preferential access to water over law-abiding senior rights holders.
● Violates the public’s right to know and participate in government decisions under Article II, Sections 8 and 9, by allowing tens of thousands of wells to be approved without public notice, transparency, or review.
The plaintiffs, a coalition including Montana League of Cities and Towns, Association of Gallatin Agricultural Irrigators, Clark Fork Coalition, Montana Environmental Information Center, Montana Farm Bureau Federation, Trout Unlimited, and individual landowners, represent Montanans from every corner of the state whose livelihoods, communities, and local economies depend on fair and sustainable water management. Together, they seek a declaration that the Exempt Well Law is unconstitutional, and an injunction preventing the state from continuing to allow unpermitted groundwater development that harms existing water users.
“Farmers and ranchers have followed the rules and invested generations of work based on secure access to water,” said Scott Kulbeck, executive vice president of the Montana Farm Bureau Federation. “Everyone has to play by the same rules. When some folks skip the permit process and pull from a water source that’s already spoken for, it hurts their neighbors. This case is about protecting the way Montanans have managed water responsibly for generations.”
“For irrigators, water is the foundation of our livelihoods,” said Kurt Dykema, board president of the Association of Gallatin Agricultural Irrigators. “When thousands of new wells are drilled with no regard for senior rights, it’s not just a paperwork or data problem, it’s a real-world impact on our ability to grow crops and feed our communities. We’re simply asking the state to follow the Constitution and the prior appropriation doctrine.”
“We did everything the law asked of us to protect our water and our neighbors’ water-collecting data, hiring experts, and working hand-in-hand with the state,” said Kevin Chandler, a hydrogeologist who ranches outside of Absarokee. “In our case, it’s frustrating to see a subdivision using dozens of exempt wells get approved, when the same development proposing a single shared community well would have been denied. Those community systems are more efficient and safer, and their use can be measured and monitored. The current policy promotes poorly planned development and passes the hidden costs to future homeowners, counties, and towns.”
Exempt wells do not facilitate affordable housing; they subsidize a development model of low-density housing that removes incentives for on-system, dense development. Reliance on exempt wells since 1973 has not solved the affordability crisis; in fact, in 2024 the National Association of Realtors ranked Montana’s housing market the least affordable nationwide. Eliminating the exempt well loophole in its current form will lead to more affordable homes by increasing density and spreading costs among more system users for more Montanans who are being increasingly squeezed by the housing market.
Responsible growth is possible — and it starts with smart water policies. New homes can and should be served by community or municipal water systems that are more efficient, affordable, and accountable. Developers already have workable tools under Montana law: connecting to existing city water systems, building shared community wells that are properly permitted and monitored, and–when required–developing mitigation plans that offset impacts to other water users and streamflows. These existing solutions promote smarter land use, protect the state’s limited water supplies, and help avoid costly future conflicts over water.
For decades, local governments, water users, and conservation organizations have called on the state to close the exempt well loophole. Today’s lawsuit follows the exhaustion of all legislative avenues and administrative inaction, and seeks to ensure that Montana fulfills its constitutional duty to protect senior water rights.
The firm of Franz and Driscoll, PLLP, represents Montana League of Cities and Towns, Association of Gallatin Agricultural Irrigators, Montana Farm Bureau Federation, and Mark Runkle. The Western Environmental Law Center represents the Clark Fork Coalition, Montana Environmental Information Center, and Kevin and Katrin Chandler.
Background: The exempt well provision was first adopted in 1973 to allow small domestic and agricultural users to drill limited-capacity wells without a permit. In 1987, the legislature clarified that multiple wells drawing from the same source could be considered a “combined appropriation” subject to DNRC permitting. However, a 1993 DNRC rule narrowed this definition, allowing multiple unconnected wells to evade permitting so long as they were not physically plumbed together. This loophole spurred decades of legal and legislative debate. In 2014, the First Judicial District Court in Clark Fork Coalition v. Tubbs struck down DNRC’s narrow interpretation of “combined appropriation,” holding that it violated legislative intent and enabled large-scale, unpermitted water use. The Montana Supreme Court upheld that ruling in 2016, directing DNRC to apply the exemption strictly and ensure that only truly de minimis uses remain unpermitted.
Despite these rulings, DNRC and the state have not enacted regulatory or legislative reforms to address the continued overuse of the exemption. As a result, thousands of new exempt wells have been drilled in the past decade, particularly in the Gallatin, Bitterroot, Upper Missouri, and Clark Fork Basins — regions already designated as fully appropriated and which have experienced significant declines in streamflows.
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MFBF – 2025
