In a ruling on February 22, 2011 the U.S. Supreme Court (SCOTUS) overturned the Montana Supreme Court and ruled that Montana could not use a broader interpretation of the law to claim ownership of non-navigable riverbeds. SCOTUS said the state must use a segment by segment approach to determine navigability. The State had tried to collect millions in rent for use of the riverbeds from PPL Montana, which owns and operates hydroelectric projects in the State. Some private property owners and other users of streambeds were concerned they could have been on the hook for back taxes or rents had the U.S. Supreme Court not reversed the Montana Supreme Court ruling although the state denied they would attempt to collect rent from others. The U.S. Supreme Court disputed Montana's claim that a reversal of the State Supreme Court ruling would deny recreational access to streams.
The ruling by the U.S. Supreme Court was unanimous and generally reasserted prevailing law on the issue of streambed ownership and navigability.
On the test for navigability the U.S. Supreme Court Decision stated: “c) The Montana Supreme Court further erred as a matter of law in relying on evidence of present-day, primarily recreational use of the Madison River. Navigability must be assessed as of the time of statehood, and it concerns a river’s usefulness for “ ‘trade and travel.’ ” Utah, 283 U. S., at 75–76. River segments are navigable if they “ ‘[were]’ ” used and if they “ ‘[were] susceptible of being used’ ” as highways of commerce at the time of statehood. Id., at 76. Evidence of recreational use and post statehood evidence may bear on susceptibility of commercial use at the time of statehood. See id., at 82–83. In order for present-day use to have a bearing on navigability at statehood, (1) the watercraft must be meaningfully similar to those in customary use for trade and travel at the time of statehood, and (2) the river’s post statehood condition may not be materially different from its physical condition at statehood. The State Supreme Court offered no indication that it made these necessary findings.”
Both side in the case declared victory. General Counsel for PPL Montana said, “The highest court in the land has affirmed PPL Montana's long-held position that non-navigable stretches of riverbed lands are not owned by the state. Any contrary decision could have serious future implications for other Montana streambed users including ranchers, irrigators, cities, dock owners and recreational users." According to the Washington Post, Governor Brian Schweitzer thinks the state will prevail in state court and collect taxes on 85% of the streams in question. Montana had sued on behalf of the school trust fund.
The Washington Post succintly described prevailing law on ownership of streambeds. “Historically, the titles to riverbeds beneath commercially navigable waterways go to state governments upon statehood. Non-navigable riverbed ownership stays with the federal government.”
The federal government assigned its rights to private land owners and others through various laws before statehood, which now enable those landowners in Montana to claim ownership and use of non-navigable streams to the center of the riverbed.
The Court remanded the case back to the state court to decide which streams in question are navigable on a segment by segment basis. If the river or stream is navigable, in Montana the state will own the riverbed below the low water mark and may charge for use of the streambed. If the river is non-navigable, the adjacent property owner may use the streambed without paying fees or rent to the state.
According to the U.S. Supreme Court, the ruling will not affect use of the surface of the waterway of non-navigable streams, which are subject to state law, unless subsequent rulings change the determination of navigability. On that issue the Supreme Court opinion said, “(e) Montana’s suggestion that denying the State title to the disputed riverbeds will undermine the public trust doctrine—which concerns public access to the waters above those beds for navigation, fishing, and other recreational uses—underscores its misapprehension of the equal-footing and public trust doctrines. Unlike the equal footing doctrine, which is the constitutional foundation for the navigability rule of riverbed title, the scope of the public trust over waters within the State’s borders is a matter of state law, subject to federal regulatory power. Pp. 24–25”.