Exempt Well Updates: Subdivision Review Process and Combined Appropriation Guidance
Recent legislation and litigation have impacted DNRC’s processes for authorizing exempt wells in Montana. This webpage provides information about the current status of DNRC’s exempt well evaluation process, as well as what’s on the horizon.
To understand what has changed, what has not changed, and whether you need to take action, it is helpful to understand several key terms and concepts.
All water uses starting after June 30, 1973, require a water right in the form of either a water use permit or a water right issued under an exception to the permitting process.
Water Permits: A water permit is required for all surface water use and groundwater uses over 35 gallons per minute (gpm) or 10 acre-feet per year. DNRC reviews and evaluates six permit criteria when reviewing water permit applications, and there are opportunities for public comment and objection. If a valid objection is received, additional evidence and information is considered at an administrative hearing.
Permit Exceptions, a.k.a. Exempt Wells: Small groundwater developments that use 35 gpm or less and do not exceed 10 acre-feet per year are known as “exempt wells” and may qualify for an exception to the water permit process. Completed groundwater uses that meet the permit exception receive a Groundwater Certificate rather than a water permit (85-2-306, MCA).
Montana law contains an important sideboard on the use of exempt wells intended to prevent larger water diversions from getting around the permit process. This limitation is referred to as “combined appropriation.” Section 85-2-306, MCA, provides that a permitted water right is required for “a combined appropriation from the same source by two or more wells or developed springs exceeding 10 acre-feet, regardless of the flow rate.”
This law requires DNRC to determine whether two or more groundwater developments that draw from the same source should be considered as a single exempt use of water, thereby requiring users to share the 10 acre-feet exception to the permitting process.
The term “combined appropriation” is defined in administrative rule. The definition requires that DNRC weigh various factors to determine whether a set of groundwater developments could have been accomplished by a single appropriation and therefore must share the same 10 acre-feet. (ARM 36.12.101(12)).
From September, 2014 to February, 2024, DNRC coordinated with the Montana Department of Environmental Quality (DEQ) on issuing subdivision review letters. These letters included DNRC’s evaluation of proposed water use for housing developments seeking a Certificate of Subdivision Approval (COSA) through DEQ. They did not approve or guarantee a current or future water right. DEQ’s rules previously required COSA applicants to obtain a subdivision review letter from DNRC. A Memorandum of Understanding (MOU) between the two agencies outlined DNRC’s obligation to provide these letters.
Shortly after the decision in Upper Missouri Waterkeeper, et al v. DNRC, Cause No. BDV-2022-38 (discussed in the following tab), DNRC and DEQ terminated their MOU. DEQ also engaged in rulemaking to repeal its rule requiring subdivision review letters as a condition of obtaining a COSA.
On February 14, 2024, Montana’s First Judicial District Court issued an order in Upper Missouri Waterkeeper, et al v. DNRC, Cause No. BDV-2022-38, (often referred to as the “Horse Creek Hills case”). The Court ruled that DNRC could not allow a developer to appropriate up to 10 acre-feet of water under the permit exception (i.e., using exempt wells) for each phase of a four-phased subdivision. The Court concluded that DNRC was required to treat all phases of a multi-phased development as part of the same combined appropriation.
Moving Forward
The water administration results of the Upper Missouri Waterkeeper case are twofold. First, DNRC no longer provides subdivision review letters. Second, all lots in a multi-phase subdivision must now share a combined water use limit of 10 acre-feet per year to qualify for a permit exception. This means some subdivisions may not have enough water under a single exception to serve every home. In response, DNRC worked with stakeholders to draft two bills for the 2025 Legislative session to help affected property owners and bring more clarity to the process:
- One of the bills, House Bill 681 (HB 681), passed and became effective on January 1, 2026. Learn more about HB 681 below.
- The other bill, Senate Bill 358 (SB 358), sought to reform exempt well policy in Montana while also supporting existing homeowners in achieving water right compliance. SB 358 did not pass. In the absence of a legislative solution for water users impacted by the court decision DNRC is conducting outreach to Montana water users on how they may be impacted.
HB 681 and Notices of Intent
Beginning Jan. 1, 2026, water users who intend to develop water use through a permit exception must file a Notice of Intent (Form 602I) with DNRC before using water from an exempt well. This provides an opportunity to know whether land developers and water users qualify for the permit exception before investment in infrastructure is made.
When a water user submits a correct and complete Notice of Intent, DNRC will review and authorize or deny the Notice of Intent within 10 business days.
- If the proposed water use is eligible, DNRC will authorize the Notice of Intent and the water user will have five years to complete the project, put the water to use, and file a Notice of Completion.
- If the proposed water use is not eligible, the Notice of Intent will be denied, and the water user will be notified and directed to the water right permit process.
- If authorized, the water user will need to file a Notice of Completion once they’ve put the water to use.
Frequently Asked Questions
- The Notice of Intent requires information about the proposed point of diversion, place of use, and how you intend to divert and use the water.
- Like other water rights forms submitted to DNRC, Notices of Intent will need to be deemed “correct and complete” before they can be processed. In plain language, this means that they must contain all the information DNRC needs to make a determination.
- Even if you're already using water or have drilled your well, you must file a Notice of Intent. DNRC can no longer process a Notice of Completion of Groundwater Development (Form 602) – the form submitted once the water is put to use – without an authorized Notice Of Intent unless it was pending with DNRC prior to January 1, 2026.
- An authorized Notice of Intent expires after 5 years. There is the opportunity for one 5-year extension to complete the project and put the water to use.
- DNRC can no longer process a Notice of Completion of Groundwater Development (Form 602) – the form submitted once the water is put to use – without an authorized Notice Of Intent unless it was pending with DNRC prior to January 1, 2026.
- All new uses of water in Montana require a water right.
- To determine if you already have a water right, use DNRC’s Water Rights Query System. Be sure to search for water rights with a place of use that matches property you own in addition to water rights where you are the listed owner. If you have any questions or are having trouble finding your water right, please contact your DNRC water resources regional office.
- Notices of Intent are searchable through the Water Rights Query System, helping buyers and planners confirm water eligibility for specific parcels. A Notice of Intent to Appropriate Groundwater will appear as an Intent to Appropriate version on a Groundwater Certificate record. The status of the record may be listed as any of the following: NOI Pending, NOI Authorized, Terminated, Denied, or Expired. Use the available search fields or filter the search results to find records.
- If you already have a water right which covers your current water uses, there is no impact to you from either the court case or the passage of HB 681. It is always a good idea to visit the DNRC Water Rights Query System and verify that your information is correct. If you are in a subdivision that is impacted by the court decision, DNRC encourages you to consider voluntarily reducing your allocation to allow your neighbors to use water under the same permit exception as you.
- If a complaint is filed by the public and there is a violation of the Montana Water Use Act, DNRC generally initiates the following procedure:
- Investigate: Upon receiving a formal complaint, DNRC will investigate the alleged violation of the Montana Water Use Act and communicates findings with both parties.
- Educate: DNRC will educate parties on the law and the violation.
- Seek Compliance: DNRC seeks to gain voluntary compliance before going forth with formal action.
- Enforcement: DNRC evaluates the severity and impact of the violation to prioritize whether to proceed with Department-led enforcement.
- Complainants may also seek legal remedies independently from DNRC if they choose to.