The United States Supreme Court gave the hydropower industry a major victory last week in the closely watched case of PPL Montana, LLC v. State of Montana, 565 U. S. ____ (2012). The Court sided with PPL Montana on the proper application of the federal navigability-for-title test, overturning a decision of the Montana Supreme Court permitting the State to start charging rent for existing hydropower facilities, some of which were built over 100 years ago.

The decision provides much-needed certainty to the hydropower industry at a time when the nation is seeking new sources of clean power. It makes clear that States are not free to start charging the owners of dams and reservoirs, or other water-based facilities, millions of dollars of “rent” based on novel and sweeping claims of riverbed ownership. For PPL Montana, the State’s claim for back rent was over $50 million and it claimed many millions of dollars going forward.

Montana’s recent demand for rent was based on its assertion that the rivers where the facilities are located had been navigable for title at the time Montana became a State – in 1889 – and that the State therefore gained title to the riverbeds under the “equal footing doctrine.” The Montana courts looked at the rivers as a whole and brushed past PPL Montana’s expert evidence of non-navigability, awarding summary judgment to the State on the question of navigability, and thus title.

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