Z-0837.1

HOUSE BILL 2603

ByRepresentatives Springer, Chandler, Chapman, Fitzgibbon, Lekanoff, and Tharinger; by request of Department of Ecology

AN ACT Relating to trust water rights; amending RCW 90.42.005, 90.42.010, 90.42.030, 90.42.040, 90.42.080, 90.42.100, 90.42.110, 90.42.130, 90.42.150, 90.42.160, and 90.80.055; reenacting and amending RCW 90.42.020; adding new sections to chapter 90.42 RCW; and repealing RCW 90.42.120.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. RCW 90.42.005 and 2003 c 144 s 1 are each amended to read as follows:

(1) It is the policy of the state of Washington to recognize and preserve water rights in accordance with RCW 90.03.010.

(2) The legislature finds that:

(a) The state of Washington is faced with a shortage of water with which to meet existing and future needs, particularly during the summer and fall months and in dry years when the demand is greatest;

(b) Consistent with RCW 90.54.180, issuance of new water rights, voluntary water transfers, and conservation and water use efficiency programs, including storage, all are acceptable methods of addressing water uses because they can relieve current critical water situations, provide for presently unmet needs, and assist in meeting future water needs. Presently unmet needs or current needs includes the water required to increase the frequency of occurrence of base or minimum flow levels in streams of the state, the water necessary to satisfy existing water rights, or the water necessary to provide full supplies to existing water systems with current supply deficiencies;

(c) The interests of the state and its citizens will be served by developing programs and regional water resource plans, in cooperation with local governments, federally recognized tribal governments, appropriate federal agencies, private citizens, and the various water users and water interests in the state, that increase the overall ability to manage the state's waters in order to resolve conflicts and to better satisfy both present and future needs for water; and

(d) Water banking as a function of the state water trust ((water [rights] program)) and as authorized by this chapter can provide an effective means to facilitate the voluntary transfer of water rights established through conservation, purchase, lease, or ((donation))other means, to preserve water rights and provide water for presently unmet and future needs; and to achieve a variety of water resource management objectives throughout the state, including drought response, improving streamflows on a voluntary basis, providing water mitigation, or reserving water supply for future uses.

Sec. 2. RCW 90.42.010 and 1998 c 245 s 173 are each amended to read as follows:

(1) The legislature finds that a need exists to develop and test a means to facilitate the voluntary transfer of water and water rights, including conserved water, to provide water for presently unmet needs and emerging needs. Further, the legislature finds that water conservation activities have the potential of affecting the quantity of return flow waters to which existing water right holders have a right to and rely upon. It is the intent of the legislature that persons holding rights to water, including return flows, not be adversely affected in the implementation of the provisions of this chapter.

Sec. 3. RCW 90.42.020 and 2009 c 283 s 3 are each reenacted and amended to read as follows:

The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.

(1) "Department" means the department of ecology.

(2) "Local government" means a city, town, public utility district, irrigation district, public port, county, sewer district, or water district.

(3) "Net water savings" means the amount of water that is determined to be conserved and usable within a specified stream reach or reaches for other purposes without impairment or detriment to water rights existing at the time that a water conservation project is undertaken, reducing the ability to deliver water, or reducing the supply of water that otherwise would have been available to other existing water uses.

(4) "Pilot planning areas" means the geographic areas designated under RCW 90.54.045(2).

(5) "Trust water right" means any water right ((acquired by))donated, leased, or consigned to the state under this chapter for management in the ((state's))state water trust ((water rights program)).

(6) "Water conservation project" means any project or program that achieves physical or operational improvements that provide for increased water use efficiency in existing systems of diversion, conveyance, application, or use of water under water rights existing on July 28, 1991.

Sec. 4. RCW 90.42.030 and 1993 c 98 s 2 are each amended to read as follows:

(1) For purposes of this chapter, the state may enter into contracts to provide moneys to assist in the financing of water conservation projects. In consideration for the financial assistance provided, the state shall obtain public benefits defined in guidelines developed under RCW 90.42.050.

(2) If the public benefits to be obtained require ((conveyance or modification of a water right, the recipient of funds shall convey to the state the recipient's interest in that part of the water right or claim constituting all or a portion of the resulting net water savings for deposit in the trust water rights program. The amount to be conveyed shall be finitely determined by the parties, in accordance with the guidelines developed under RCW 90.42.050, before the expenditure of state funds. Conveyance may consist of complete transfer, lease contracts, or other legally binding agreements))a transfer or modification of a water right, the recipient of funds shall consign to the state the recipient's interest in that part of the water right constituting all or a portion of the resulting net water savings for deposit in the state water trust. The amount of water to be transferred must be finitely determined by the parties, in accordance with the guidelines developed under RCW 90.42.050, before the expenditure of state funds. RCW 90.03.380 has no applicability to trust water rights acquired by the state through the funding of water conservation projects. When negotiating for the acquisition of conserved water or net water savings, or a portion thereof, the state may require evidence of a valid water right.

(3) As part of the contract, the water right holder and the state shall specify the process to determine the amount of water the water right holder would continue to be entitled to once the water conservation project is in place.

(4) The state shall cooperate fully with the United States in the implementation of this chapter. Trust water rights may be acquired through expenditure of funds provided by the United States and shall be treated in the same manner as trust water rights resulting from the expenditure of state funds.

(5) If water is proposed to be ((acquired by or conveyed))donated or transferred to the state as a trust water right by an irrigation district, evidence of the district's authority to represent the water right holders shall be submitted to and for the satisfaction of the department.

(6) The state shall not contract with any person to acquire a water right served by an irrigation district without the approval of the board of directors of the irrigation district. Disapproval by a board shall be factually based on probable adverse effects on the ability of the district to deliver water to other members or on maintenance of the financial integrity of the district.

NEW SECTION.  Sec. 5. A new section is added to chapter 90.42 RCW to read as follows:

(1) Trust water rights may be donated, leased, or consigned to the state on a temporary or permanent basis.

(2) The department may authorize the use of trust water rights leased or transferred to the state for instream flows, irrigation, municipal, or other beneficial uses.

(3) A trust water right is considered to be exercised as long as it is in the state water trust.

(4) A trust water right retains the same priority date as the water right from which it originated. As between the two rights, the trust right is deemed to be inferior in priority to the water right from which it originated, unless otherwise specified by an agreement between the state and the party holding the original right.

(5) RCW 90.14.140 through 90.14.230 have no applicability to trust water rights held by the department under this chapter.

(6) A right established in a state adjacent to Washington that authorizes the use of water from a waterbody that extends between Washington and the adjacent state may be transferred into the state water trust to be managed by the department for instream flow purposes. The priority date for such a right is the priority date recognized by the adjacent state where the water right was established.

NEW SECTION.  Sec. 6. A new section is added to chapter 90.42 RCW to read as follows:

(1) State funds may be expended to acquire all or portions of existing surface water and groundwater rights by purchase or any appropriate means other than by condemnation, from any person or entity or combination of persons or entities. The department may enter into leases, contracts, or such other arrangements with other persons or entities as appropriate. A water right acquired by the state that is expressly conditioned to limit its use to instream purposes must be administered as a trust water right in compliance with that condition.

(2) To the extent practicable and subject to legislative appropriation, water rights acquired by the state in an area with an approved watershed plan developed under chapter 90.82 or 90.94 RCW must be consistent with that plan if the plan calls for such an acquisition.

(3) No funds may be expended for the purchase of water rights by the state pursuant to this section unless specifically appropriated for this purpose by the legislature.

Sec. 7. RCW 90.42.040 and 2009 c 283 s 4 are each amended to read as follows:

(1) ((A trust water right acquired by the state shall be placed in the state trust water rights program to be managed by the department. The department shall exercise its authorities under the law in a manner that protects trust water rights. Trust water rights acquired by the state shall be held in trust and authorized for use by the department for instream flows, irrigation, municipal, or other beneficial uses consistent with applicable regional plans for pilot planning areas, or to resolve critical water supply problems. The state may acquire a groundwater right to be placed in the state trust water rights program. To the extent practicable and subject to legislative appropriation, trust water rights acquired in an area with an approved watershed plan developed under chapter 90.82 RCW shall be consistent with that plan if the plan calls for such acquisition.

(9) Where a portion of an existing water right that is acquired or donated to the trust water rights program will assist in achieving established instream flows))The transfer of a water right into the state water trust may be authorized only if the department determines that exercise of the trust water right will: (a) Not impair water rights existing at the time the trust water right is established; and (b) serve the public interest. If impairment becomes apparent during the time a trust water right is being exercised, the department shall cease or modify the trust water right to eliminate the impairment.

(9) Where a portion of an existing water right is transferred to the state and expressly conditioned to limit its use to instream flow purposes or groundwater preservation, the department shall process the change or amendment of the existing right without conducting a review of the extent and validity of the portion of the water right that will remain with the water right holder.

NEW SECTION.  Sec. 8. A new section is added to chapter 90.42 RCW to read as follows:

(1) The department may enter into a short-term lease and hold a water right in the state water trust only if the department determines that:

(a) Exercise of the trust water right will not impair water rights existing at the time the trust water right is established. If impairment becomes apparent during the time a trust water right is being exercised, the department shall cease or modify the trust water right to eliminate the impairment; and

(b) Exercise of the trust water right will serve the public interest.

(2) For each short-term lease executed, the department may issue documentation necessary to reflect changes in purpose of use, place of use, point of diversion, or point of withdrawal. The department shall post relevant information on its web site for each short-term lease.

(3) Water rights may be held in the state water trust through a short-term lease without a change to the purpose of use. The total quantity of water eligible to be leased by the department may not exceed the extent to which the water right was exercised during the five years before the lease was executed, except:

(a) The department shall exclude time periods where nonuse of the water right was excused from relinquishment under RCW 90.14.140(1);

(b) If a water right is exempt from relinquishment under RCW 90.14.140(2) (a) or (d), the department shall calculate the amount of water eligible to be leased based on historical beneficial use.

(4) If a lease is for only a portion of a water right, the quantity leased by the department, plus the portion of the water right remaining with the original water right holder, may not exceed the total quantity of water eligible to be leased under this section.

(5) A water right holder who believes his or her water right has been impaired by a trust water right leased under this section may request that the department review the impairment claim. If the department determines that a trust water right leased under this section is impairing existing water rights in violation of RCW 90.42.070, the trust water right must be altered by the department to eliminate the impairment. Any decision of the department to alter or not to alter a trust water right leased under this subsection is appealable to the pollution control hearings board under RCW 43.21B.230.

(6) The department's leasing of a water right under this section is not evidence of the validity or quantity of the water right.

(7) A water right leased by the department on a temporary basis reverts to the original water right holder when the lease period ends. The quantity of water available for use is the consumptive quantity of the right prior to lease into trust.

(8) A trust water right leased to the state is considered to be exercised as long as it is held in the state water trust.

Sec. 9. RCW 90.42.080 and 2009 c 283 s 5 are each amended to read as follows:

(1)(((a) The state may acquire all or portions of existing surface water or groundwater rights, by purchase, gift, or other appropriate means other than by condemnation, from any person or entity or combination of persons or entities. Once acquired, such rights are trust water rights. A water right acquired by the state that is expressly conditioned to limit its use to instream purposes shall be administered as a trust water right in compliance with that condition.

(4) Except as provided in subsections (10) and (11) of this section, a water right donated under subsection (1)(b) of this section shall not exceed the extent to which the water right was exercised during the five years before the donation nor may the total of any portion of the water right remaining with the donor plus the donated portion of the water right exceed the extent to which the water right was exercised during the five years before the donation))A holder of a right to surface water or groundwater may choose to donate all or a portion of the person's water right to the state water trust on a temporary or permanent basis solely to assist in providing instream flows or to preserve surface water or groundwater resources. The department shall accept the donation, in quantities as determined under this section, on such terms as the person may prescribe. A water right that is donated cannot be used for the purpose of instream flow for the mitigation of out-of-stream uses.

(b) If a water right is exempt from relinquishment under RCW 90.14.140(2) (a) or (d), the department shall calculate the amount of water eligible to be donated based on historical beneficial use.

(3) A water right holder who believes his or her water right has been impaired by a trust water right donated under ((subsection (1)(b) of)) this section may request that the department review the impairment claim. If the department determines that a trust water right resulting from a donation under ((subsection (1)(b) of)) this section is impairing existing water rights in violation of RCW 90.42.070, the trust water right shall be altered by the department to eliminate the impairment. Any decision of the department to alter or not to alter a trust water right donated under ((subsection (1)(b) of)) this section is appealable to the pollution control hearings board under RCW 43.21B.230. A donated water right's status as a trust water right under this subsection is not evidence of the validity or quantity of the water right.

(((5) The provisions of RCW 90.03.380 and 90.03.390 do not apply to donations for instream flows described in subsection (1)(b) of this section, but do apply to other transfers of water rights under this section except that the consumptive quantity of a trust water right acquired by the state and held or authorized for use by the department is equal to the consumptive quantity of the right prior to transfer into the trust water rights program.

(b) The total of the donated or leased portion of the water right and the portion of the water right the water right holder continues to use shall not exceed the historical beneficial use of that right during the duration of the trust.))

Sec. 10. RCW 90.42.100 and 2009 c 283 s 2 are each amended to read as follows:

(1) ((The department is hereby authorized to use the trust water rights program for water banking purposes statewide.))Water banks provide an efficient means to allow changes from one beneficial use of water to another and to provide water for uses that may not otherwise have water available. Use of the state water trust for water banking purposes statewide is hereby authorized when the department finds that such a use will serve community needs and not impair existing rights.

(2) Water banking may be used for one or more of the following purposes:

(a) To authorize the use of trust water rights to mitigate for water resource impacts, future water supply needs, or any beneficial use under chapter 90.03, 90.44, or 90.54 RCW, consistent with any terms and conditions established by the transferor and the department, except that within the Yakima river basin return flows from water rights authorized in whole or in part for any purpose shall remain available as part of the Yakima basin's total water supply available and to satisfy existing rights for other downstream uses and users; and

(b) ((To document transfers of water rights to and from the trust water rights program; and

(c))) To provide a source of water rights the department can make available to third parties on a temporary or permanent basis for any beneficial use under chapter 90.03, 90.44, or 90.54 RCW.

(3) ((The department shall not use water))Water banking may not be used to:

(a) ((Cause detriment or injury to existing rights;

(b))) Issue temporary water rights or portions thereof for new potable uses requiring an adequate and reliable water supply under RCW 19.27.097;

(((c)))(b) Administer federal project water rights, including federal storage rights; or

(((d)))(c) Allow carryover of stored water in the Yakima basin from one water year to another water year if it would negatively impact the total water supply available.

(4) ((The department shall provide electronic notice and opportunity for comment to affected local governments and affected federally recognized tribal governments prior to initiating use of the trust water rights program for water banking purposes for the first time in each water resource inventory area.

(6))) For purposes of this section and RCW 90.42.135, "total water supply available" shall be defined as provided in the 1945 consent decree between the United States and water users in the Yakima river basin, and consistent with later interpretation by state and federal courts.

NEW SECTION.  Sec. 11. A new section is added to chapter 90.42 RCW to read as follows:

(1) An entity seeking to use the state water trust for water banking purposes must submit a water banking application to the department requesting approval for the establishment of a water bank.

(2) The entity submitting the water banking application must provide the department information that includes, but is not limited to:

(a) The water rights proposed for transfer to the state water trust for mitigation;

(b) The beneficial uses of water that the bank intends to serve;

(c) The anticipated geographic area to be served by bank operations;

(d) The anticipated demand to be served by the bank, including the water quantities, timing, and other information identified by the department to evaluate the impacts from the potential new uses; and

(e) Description of anticipated community benefits.

(3) A water banking agreement between the department and the entity seeking to use the state water trust for banking purposes must establish bank administration responsibilities including, at a minimum:

(a) The roles and responsibilities of the water banking entity, the department, and any third parties;

(b) The process by which the department or water banking entity will authorize mitigated water uses;

(c) Identification of specific water rights and the legal mechanism for assignment of mitigation;

(d) Conditions and limitations on use of water, including manner of use, limits on assignment of use, and geographic and quantitative limits; and

(e) The process and conditions for modifying or terminating the banking agreement.

Sec. 12. RCW 90.42.110 and 2003 c 144 s 3 are each amended to read as follows:

(1) The department, with the consent of the water right holder, may identify trust water rights for administration for water banking purposes, including trust water rights established before May 7, 2003.

(2) An ((application to transfer a water right to the trust water [rights] program shall be reviewed under RCW 90.03.380 at the time the water right is transferred to the trust water [rights] program for administration for water banking purposes, and notice of the application shall be published by the applicant as provided under RCW 90.03.280. The application must indicate the reach or reaches of the stream where the trust water right will be established before the transfer of the water right or portion thereof from the trust water [rights] program, and identify reasonably foreseeable future temporary or permanent beneficial uses for which the water right or portion thereof may be used by a third party upon transfer from the trust water right[s] program. In the event the future place of use, period of use, or other elements of the water right are not specifically identified at the time of the transfer into the trust water [rights] program, another review under RCW 90.03.380 will be necessary at the time of a proposed transfer from the trust water [rights] program))entity applying to use the state water trust for banking purposes shall submit a water right change application under RCW 90.03.380 to change the purpose of use of the water right to instream flow for the mitigation of out-of-stream uses. The department shall process the water right change application under the cost-reimbursement procedure established under RCW 90.03.265. The applicant shall provide public notice of the application as provided under RCW 90.03.280.

NEW SECTION.  Sec. 13. A new section is added to chapter 90.42 RCW to read as follows:

(1) The department shall publish its preliminary decision relating to each water banking application on its web site. The department publication must include the water banking application, proposed banking agreement, and corresponding draft report of the examination for the water right transfer. The department shall provide electronic notice of the preliminary decision to all affected local governments and federally recognized tribal governments. The department shall accept public comments for a minimum of fourteen days.

(2) Approval of the water banking application requires the following:

(a) The report of examination issued under RCW 90.03.380 includes an approval of the water right change and no parties appeal;

(b) The department determines that water rights identified in the water banking application are sufficient to serve current and projected demand; and

(c) The department determines that the water bank will serve community needs.

(3) After a water banking application is approved, the department shall include a copy of the executed water banking agreement with the information maintained pursuant to RCW 90.42.170.

(4) An approved water bank that seeks to modify operations from their existing banking agreement shall submit a new banking application to the department before authorizing new uses. A water bank operating prior to the effective date of this section that seeks to modify operations from its existing banking agreement shall submit an application under section 11 of this act.

(5) The department's decision on a water banking application under this section or the transfer of a water right or portion thereof for water banking purposes may be appealed to the pollution control hearings board under RCW 43.21B.230 or to a superior court conducting a general adjudication under RCW 90.03.210.

Sec. 14. RCW 90.42.130 and 2016 c 215 s 1 are each amended to read as follows:

(1) The department shall seek input from agricultural organizations, federal agencies, tribal governments, local governments, watershed groups, conservation groups, and developers on water banking, including water banking procedures and identification of areas in Washington where water banking could assist in providing water supplies for instream and out-of-stream uses.

Sec. 15. RCW 90.42.150 and 2009 c 283 s 6 are each amended to read as follows:

(1) Costs incurred by the department associated with water service contracts with federal agencies may be recovered by the department from persons withdrawing water or credits for water associated with water banking purposes as a condition of the exercise of a water right supplied from a federal water project.

Sec. 16. RCW 90.42.160 and 2009 c 283 s 8 are each amended to read as follows:

The department may adopt rules as necessary to implement this chapter, including rules to establish fees related to cost recovery established under RCW 90.42.150(2).

Sec. 17. RCW 90.80.055 and 2001 c 237 s 9 are each amended to read as follows:

(1) Except as provided in subsection (2) of this section, a board shall operate on a countywide basis or on an area-wide basis in the case of a board with jurisdiction in more than one county or water resource inventory area, and have the following powers, in addition to any other powers granted in this chapter:

(a) Except as provided in subsections (2) and (3) of this section, a board may act upon applications for the same kinds of transfers that the department itself is authorized to act upon((, including an application to establish a trust water right under chapter 90.38 or 90.42 RCW)). A board may not act upon an application for the type of transfer within an irrigation district as described in RCW 90.03.380(3). If a board receives an application for a transfer between two irrigation districts as described in RCW 90.03.380(2), the board must, before publication of notice of the application, receive the concurrence specified in that section.

(b) A board may act upon an application to transfer a water right claim filed under chapter 90.14 RCW. In acting upon such an application, the board must make a tentative determination as to the validity and extent of the right, if any, embodied in the claim and may only issue a record of decision regarding a transfer of such a claim to the extent it is tentatively determined to be valid. Neither the board's tentative determination, nor the director's acceptance of such a tentative determination, constitutes an adjudication of the right under RCW 90.03.110 through 90.03.240 or 90.44.220, and such a determination does not preclude or prejudice a subsequent challenge to the validity, priority, or quantity of the right in a general adjudication under those sections.

(c) A board may establish a water right transfer information exchange through which all or part of a water right may be listed for sale or lease. The board may also accept and post notices in the exchange from persons interested in acquiring or leasing water rights from willing sellers.

(d) The director shall assign a representative of the department to provide technical assistance to each board. If requested by the board, the representative shall work with the board as it reviews applications for formal acceptance, prepares draft records of decision, and considers other technical or legal factors affecting the board's development of a final record of decision. A board may request and accept additional technical assistance from the department. A board may also request and accept assistance and support from the county government or governments of the county or counties in which it operates.

(2) The jurisdiction of a board shall not apply within the boundaries of a federal Indian reservation or to lands held in trust for an Indian band, tribe, or nation by the federal government.

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