Bozeman, MONTANA--Commercial and residential subdivisions have been spreading across the Gallatin and Helena Valleys like a patchwork quilt replacing open land. Concerns range from increased traffic to the loss of open space, but the gravest issue centers on water, both its quantity and quality. Increasingly, longtime residents and senior water-rights holders are finding themselves in conflict with rapid development fueled by Montana’s “exempt well” loophole.

Developers have used a loophole in Montana water law to build subdivisions using exempt wells, allowing each home to have its own individual well and septic system rather than connecting to centralized infrastructure. What was originally intended for minimal rural use has, over the past three decades, become a tool for large-scale residential growth.

Sue Duncan and her husband purchased 60 acres west of Belgrade in 1979, where they built a home and small farm before later expanding their acreage. Their water rights date back to 1888 and 1872. Duncan has closely monitored growth pressures since suburban sprawl first began creeping west of Belgrade.

Under Montana law, an exempt well is defined as pumping less than 35 gallons per minute or 10 acre-feet of water annually. These wells were originally intended for “de minimis use”—watering livestock and supplying water for a rural home. However, Duncan said developers have spent the last 30 years “sticking more straws in the ground” by using exempt wells to serve dense housing developments without undergoing the state’s normal water permitting process.

The River Rock subdivision south of the Duncans began development in 1993. That same year the Department of Natural Resources loosened the rules around combined appropriation to only include wells that were physically manifolded together. This change expanded the use of the exemption for development.  

“Developers don’t think big enough,” Duncan said. “They look at everything through a telescope, not at the overall picture. They don’t look at the history of that area, and they don’t look to the future. The number-one challenge is how to finance the water and sewer infrastructure.”

In November 2025, the Montana Farm Bureau joined a diverse coalition of municipalities, farm and ranch families, landowners, and conservation organizations in filing a legal challenge against the Montana Department of Natural Resources and Conservation and the state of Montana over continued implementation of the exempt well loophole. The lawsuit argues that the loophole allows unregulated groundwater development outside the state’s permitting system and does not adequately protect senior water rights holders and Montana’s long-term water security.

In a state where water is limited and essential, Montana law guarantees that senior appropriators, those with older, established rights, are first in line to use available water. Yet the exempt well loophole has allowed developers to drill thousands of groundwater wells without permits, even in basins legally closed to new appropriations. Critics argue the unchecked proliferation of exempt wells has reduced streamflows, impaired senior water rights, and undermined the state’s constitutional obligation to protect Montana’s waters for the benefit of its people.

For Duncan, the issue is deeply personal. “We never thought we would have to think about running out of water because these exempt wells are for de minimis use,” she said. “We never dreamed developers would use exempt wells for large-scale subdivisions.”

Duncan added that water quality tops the list of concerns especially involving septic tank drainage. In many places where there is an exempt well there is a septic tank, which contributes to nutrients in surface waters and increases the threat of polluted water.

While senior water-rights holders have been among the first to raise concerns, homeowners in these developments are increasingly feeling the consequences as well.

In the Helena Valley, rapid development in an area with a shallow and limited water table has left many homeowners struggling with unreliable wells. Dustin Gillaspie moved into the Emerald Ridge subdivision in 2022 in a home built in 2004.

“Our bylaws read that you must have an acre of grass around your house,” Gillaspie said, “Because of the limited available water, nobody does it. There just isn’t enough water.”

He said water shortages have become a routine part of life in the subdivision.

“Everyone above us has water issues,” he explained. “Talking with our neighbors, if someone takes a shower, it depletes the well and they need to wait 30 minutes before someone else can shower. Homeowners are constantly drilling new wells. One drilling rig was at a neighbor’s house for two weeks.”

Many wells in the subdivision are approximately 200 feet deep, but as groundwater levels decline, homeowners are being forced to drill deeper wells, an expensive and time-consuming process that often costs tens of thousands of dollars.

The problem extends beyond water availability. Gillaspie, a local Farm Bureau Insurance agent, noted that insurers once required homes to be located near a reliable hydrant before issuing policies. Although that is not currently the case, in rural subdivisions dependent on individual wells, fire protection and water reliability are becoming increasing concerns.

Unfortunately, Duncan said, homeowners are often the ones left dealing with the unintended consequences of poorly planned growth.

Centralized water and sewer systems can cost millions of dollars to construct, but municipalities are able to spread those costs across large numbers of users. Exempt well subdivisions allow developers to avoid paying for that infrastructure entirely by shifting the burden onto individual homeowners and neighboring communities.

The result, Duncan argues, is that existing residents and taxpayers ultimately shoulder the costs of unregulated growth. As developers build high-density projects on the edges of towns using exempt wells, they bypass municipal systems that rely on user growth to offset infrastructure expenses. That leaves cities and longtime residents paying a larger share for maintaining and upgrading water and sewer systems while also coping with the depletion of shared groundwater resources and potential decline in water quality.

“There must be site assessments,” Duncan said. “Developers need to know where the wetlands are, what to do with the drier spots. They need to design a system to fit the capabilities of the land without damaging it.”

The Montana Farm Bureau dispels the myth that if the loophole is closed, there will be no new water development. Even without exempt wells, options remain. These include adding a stock tank to an existing source (a process that was simplified in the last legislative session), replacing existing wells, hooking up to city sewer and water or working through the permitting process. Additionally, there have been no efforts to take any actions that would be retroactive to existing exempt well users.

“We believe that this loophole needs to be fixed to protect senior water rights owners as well as protecting future homeowners in subdivisions,” noted MFBF Executive Vice President Scott Kulbeck. “We want to see the permitting system work for all new responsible water uses. We are working with other senior water right users to develop legislation that would streamline water permitting for all Montanans.”