HELENA -- Federal law doesn't preempt the state from collecting rent from utilities for the use of certain riverbeds for hydroelectric dams, state District Judge Thomas Honzel of Helena has ruled.

''This is great news,'' said Attorney General Mike McGrath on Tuesday.

David Hoffman, external affairs manager for PPL Montana, said the ruling is in the early stages of the case, which is a long way from being resolved.

PPL Montana, Avista (formerly Washington Water Power Co.) and PacifiCorp asked Honzel to rule that the Federal Power Act preempts Montana's hydroelectric resources law and the state's claims for compensation for the companies' use of the riverbeds.

On Friday, the Helena judge granted the state's motion for a summary judgment, which means he ruled without conducting a full trial.

''It's clear that the judge did determine that the state does have to determine both the ownership (of the streambeds) through navigability and that the property is school trust land,'' McGrath said in an interview.

As for the next step, McGrath said state officials hope to talk with the utilities that own the dams about ''what they're going to pay for occupying our property.''

He said state will negotiate leases with the utilities, adding, ''We'll try to base it on reasonable rents that the state charges for occupations of state lands.''

McGrath said he will consult with the state Department of Natural Resources and his fellow Land Board members-Gov. Brian Schweitzer, Auditor John Morrison, Superintendent of Public Instruction Linda McCulloch and Secretary of State Brad Johnson.

PPL's Hoffman said it's still early in the litigation.

''It is clear that the judge did determine that the state does have to determine both the ownership through navigability and that the property is school trust land,'' he said. ''On these two issues, he determined there weren't factual issues sufficient to resolve it.''

Hoffman said it's important to point out that there is not a lot of precedent to follow in this case.

The dispute began in federal court in October in 2003 when two Gallatin County residents, later joined by the state and Great Falls elementary and high school districts, sued the three utilities for compensation for use of the riverbeds for their dams. They argued that the state riverbeds are part of the school trust lands, but the utilities hadn't paid to use them.

The federal court later ruled that all of the plaintiffs except for the state lacked legal standing.

The utilities later filed the current case in state court asking the judge to declare that the federal law preempted state law and stopped the state from asserting a right to collect lease payments from the utilities.

In his decision, Honzel said the state's rights to ownership and possession of these riverbeds are protected from preemption under federal law.

''Although the state cannot regulate a hydroelectric project, nothing prevents the state from obtaining rental compensation under (state law),'' the judge ruled.

''The utilities take the position that merely asking them to sit down and negotiate a lease with the state constitutes regulation preempted under the Federal Power Act,'' Honzel added. ''However, the court cannot accept this position.''