On February 22, 2012, the U.S. Supreme Court, in a unanimous decision, clarified the test for determining state ownership of riverbeds. The Court reversed the Montana Supreme Court's order for PPL Montana, LLC, a power company, to pay over $40 million in rent to the state.
At issue in PPL Montana, LLC v. Montana is ownership of the riverbeds along three Montana rivers, where PPL has operated 10 hydroelectric dams but never paid the state for their use. PPL sued Montana in state court, seeking a declaration that Montana could not seek compensation for PPL's use of riverbeds at its federally licensed dams. Montana counterclaimed, seeking a declaration that it owned the riverbeds under the "equal footing doctrine" and could therefore charge for PPL's use of its lands.
Title to riverbeds traces back to English common law. The 13 colonies held title to riverbeds that were navigable, which the Supreme Court came to interpret as "navigable in fact," or actually navigable. In United States v. Utah, 283 U.S. 64 (1931), the Court articulated that rivers "are navigable in fact when they are used, or are susceptible of being used, in their natural and ordinary condition, as highways for commerce, over which trade and travel are or may be conducted in the customary modes of trade and travel on water[.]" Under the equal-footing doctrine, all states are sovereigns with equal powers; therefore, when a new state joins the union, it obtains all rights held by the other states. Thus, the key inquiry in determining whether a state holds title to riverbeds under the equal-footing doctrine is whether a river is "navigable in fact" at the time the state enters the union.
The First Judicial District Court of Montana granted the state's motion for summary judgment, finding that the riverbeds are public-trust lands, and ordered PPL to pay over $40 million for its use of the riverbeds. The Montana Supreme Court affirmed.