Original Notice.

     Preproposal statement of inquiry was filed as WSR 05-18-044.

     Title of Rule and Other Identifying Information: Amendment to chapter 173-503 WAC, Lower and Upper Skagit water resources inventory area (WRIA 3 and 4).

     Hearing Location(s): At Bellingham, on January 11, 2006, at 1:00 p.m., at the Bellingham Public Library, Fairhaven Branch, Northwest Room, 1117 12th Street; at Mt. Vernon, on January 11, 2006, at 7:00 p.m., at Skagit Station Community Room, 105 East Kincaid Street, Suite 101; and at Darrington, on January 12, 2006, at 7:00 p.m., at the Darrington Community Center

570 Sauk Avenue.

     Date of Intended Adoption: March 30, 2006.

     Submit Written Comments to: Jacque Klug, Department of Ecology, Northwest Regional Office, 3190 160th Avenue S.E., Bellevue, WA 98008, e-mail jklu461@ecy.wa.gov, fax (425) 649-7098, by January 20, 2006.

     Assistance for Persons with Disabilities: Contact Judy Beitel by January 3, 2006, TTY (800) 833-6388 or (360) 407-6878.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed amendments would reserve a limited amount of water for future domestic, municipal, commercial/industrial, agricultural irrigation, and stock watering supply. The amendments also establish closures for certain tributary basins when the reservations are fully allocated, and set forth future water right permitting conditions. The stream flows set in the current rule would not be altered, nor would the current maximum water allocation limits for the Skagit River basin. New water users in the Skagit basin would be required to meter water use.

     Reasons Supporting Proposal: Minimum instream flows established in the current chapter 173-503 WAC create a water right with a priority date as of the date the rule was established (April 14, 2001). All water rights, including permit-exempt groundwater withdrawals under RCW 90.54.050, are junior in priority date to the instream flow and may be subject to interruption when instream flows are not met. A rule amendment is necessary to create a new administrative framework to allow new domestic, municipal, commercial and industrial water uses, and stock watering supplies. This is done in support of the goal of RCW 90.54.020(5) which requires that adequate and safe supplies of water be preserved and protected in potable conditions to satisfy human needs.

     Statutory Authority for Adoption: Chapter 90.54 RCW, Water Resources Act of 1971; chapter 90.22 RCW, Minimum water flows and levels; chapter 173-500 WAC, Water resources management program; chapter 173-503 WAC, Instream resources protection program -- Lower and Upper Skagit water resources inventory area (WRIA 3 and 4).

     Statute Being Implemented: Chapters 90.22, 90.44, and 90.54 RCW.

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Department of Ecology, governmental.

     Name of Agency Personnel Responsible for Drafting: Jacque Klug, Northwest Regional Office, Department of Ecology, (425) 649-7124; Implementation and Enforcement: Dan Swenson, Northwest Regional Office, Department of Ecology, (425) 649-7270.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     This small business economic impact statement (SBEIS) finds that the dominant impact of this proposed rule amendment is that it will provide disproportionate benefits to small business. Some small businesses will also experience net costs and these will also be disproportionate. Overall, this amendment would constitute a cost-reducing change to the existing rule under RCW 19.85.030 (2)(e), which reduces the disproportionate impact of the existing rule.

     1. Background: Water availability is a critical issue in Washington and will become even more so as time passes. Decisions related to out-of-stream water use have been controversial; caught between the need to consider environmental impacts, especially the impacts on salmon populations listed under the federal Endangered Species Act, and human demands for water.

     Ecology adopted chapter 173-503 WAC, In-stream resources protection program -- Lower and Upper Skagit water resources inventory area (WRIA 3 and 4), on April 14, 2001. The 2001 Skagit rule established the in-stream flow levels in WRIA 3 and 4, and made all future consumptive uses subject to this in-stream flow. The in-stream flow levels were established through scientific investigations that were conducted under a cooperative agreement between state, local and tribal governments in the Skagit River basin. A memorandum of agreement was signed by the City of Anacortes, Public Utility District Number 1 of Skagit County, Skagit County, Washington State (both the Department of Ecology and Department of Fish and Wildlife) and the Upper Skagit, Swinomish and the Sauk-Suiattle Indian Tribes that outlined actions that would provide for more coordinated management of water resources in the Skagit basin. An important element of the agreement was to establish in-stream flows for the Skagit River. Ecology conducted rule making that established the 2001 in-stream flow rule. After the rule was adopted, it was challenged in Skagit County v. Washington State Department of Ecology. The legal challenge is based in part on the fact that an SBEIS was not conducted during the original rule making. Ecology recognizes that conducting an SBEIS is a faster and more cost-effective approach as part of this rule-making amendment than litigation over whether an SBEIS was or is necessary.

     Ecology has determined that the existing Skagit in-stream flow rule has an impact on small business. The proposed rule amendment reduces business costs due to limitations on access to water. Therefore, it would constitute a cost-reducing change to the existing rule under RCW 19.85.030 (2)(e), which reduces the disproportionate impact of the existing rule.

     1.1 The Requirements of Small Business Impact Analysis: Ecology is issuing this SBEIS under chapter 19.85 RCW as part of this rule adoption process.

     The objective of this SBEIS is to identify and evaluate the various requirements and costs that the proposal might impose on businesses. In particular, the SBEIS examines whether the proposed rule amendment imposes a disproportionate impact on small businesses as compared to large businesses. The purpose and contents of an SBEIS are contained in RCW 19.85.040.

     1.2 Baseline: An SBEIS is limited to analyzing the changes the proposed rule amendment creates, given the existing legal setting. Therefore, this analysis focuses on proposed changes to current water management policy for the Skagit River basin.

     The current legal structure is defined by the 2001 Skagit watershed management rule and other applicable administrative rules and laws. Costs and benefits associated with implementing other rules should have been considered when those rules (WACs) were developed and adopted. Laws (RCWs) are not subject to our review.

     Accordingly, this analysis evaluates the economic impact on businesses of changes to how water would be managed resulting from the proposed rule amendment.

     2. Brief Description of the Proposed Rule Amendment and How the Changes Affect Business: The proposal creates reservations of limited amounts of water for specific uses while leaving in place the in-stream flows set in the 2001 rule. It also establishes closures for tributaries, and sets forth conditions for future water right permitting. There are several impacts to small businesses in WRIA 3 and 4, however, the negative impacts are small compared to the positive impacts the rule will have on small businesses:

     A. Water Reservations: The water reservations are not subject to the in-stream flows. The existing in-stream flow rule limits new water uses to 200 cfs. Under present conditions, this 200 cfs is available for only interruptible water rights as the in-stream flows are not met during several days in the year. This rule amendment proposes establishing reservations that authorize withdrawals of up to 25 cfs as uninterruptible water rights.

•	10 cfs would be available for agricultural irrigation, and
•	15 cfs would be available for domestic, municipal, commercial and industrial water supply, and stock watering uses.
•	The remaining 175 cfs of the 200 cfs would remain available for other users as an interruptible supply. This part of the water is unchanged in its status.

     The major change made by the proposed rule amendment is to convert 25 cfs of the interruptible water supply to an uninterruptible water source.

     This alters the usability of the water and, therefore, changes its economic value; this change is a benefit to water users including businesses. Currently, any post 2001 groundwater withdrawal, including those via permit-exempt wells in continuity with the Skagit River or its tributaries, is legally required to curtail use during low flow periods. Under the proposed reservations, the future water needs of most businesses could be met without curtailment. Moreover, the ability to use water during low flows should be a net benefit to small businesses from this rule making because most businesses require a reliable year-round water supply. The existing regulatory framework only allows for interruptible new rights. Currently, businesses that require a reliable water supply must either connect to an uninterruptible public water supply, have a well and on-site storage, or obtain water from other uninterruptible sources.

     B. Subbasin Closures: Certain tributary subbasins of the Skagit River in WRIAs 3 and 4 will be closed to further appropriation when the reservation for that particular subbasin is fully allocated. For most areas in the Skagit basin, the reservations should be adequate to fulfill the expected future water needs for at least twenty years. The subbasins subject to earlier closure are tributary basins to the Skagit basin where the demand is mostly for domestic water for residences. However, in some subbasins such as the Nookachamps, Fisher, Carpenter and Hansen creeks, the projected demand for water exceeds the reservation quantities. If population can be used as an indicator of business potential, this could affect 10% to 13% of the new business applications. Public water supplies from outside of the basin will likely be required to meet the maximum anticipated demand. If public water supplies are not made available, a water supply may be available through a purchase or transfer of existing water rights or approval of a mitigation plan. Presently, large public water systems such as the Public Utility District of Skagit County (Skagit PUD) provide water service in some parts of these subbasins. Over time, the Skagit PUD or other large public water systems should be able to provide service to most areas of the Nookachamps, Fisher, Hansen and Carpenter subbasins. Once the reservation water is allocated in a particular subbasin, a basin closure will be in effect. Tributary closures will not reduce the remaining 175 cfs of interruptible water and that water from other areas of the Skagit River basin that remain open could still be used. Tributary closures may, however, move the economic gain from the reservation from one tributary to another area.

     For those businesses that may eventually require future water from a specific closed subbasin after the closure, any withdrawal would require continual mitigation, not just during low flow periods as was the case under the previous rule. This could necessitate water leasing or transfers of existing water rights or could lead to a change in the proposed location of a business. Furthermore, businesses requiring water in a closed basin would also have the option of obtaining water supply from outside of the closed basin.

     Those with existing water rights will not be affected by these closures.

     C. Water Right Permitting: The proposal sets forth a framework for future water right permitting. The applicants seeking water rights for a new public water supply must first demonstrate there is no service from an existing public water supply. If they can be served by the existing public water supply, ecology cannot approve such a water right request.

     Connecting to a public water supply could be a cost to some businesses. This will only impose a substantive cost for companies for which the cost of hooking up is greater than the cost of developing a new water source such as drilling a well. Connection costs are likely to be lower than the cost of a well and other development costs (see the gain in section 3 below). Most businesses that require reliable water supply for domestic uses are likely to have either already connected, already have a well and on-site storage, or already have obtained water in other ways.

     The Skagit County critical areas ordinance also requires connections to public water systems under specific conditions. Consequently, for some areas this is not a new legal requirement.

     D. Reduced Flows: The Skagit River and its tributaries will have reduced in-stream flows as a consequence of the reservations. This will slightly reduce the amount of water in the river during low flow periods and could potentially indirectly impact in-stream benefits such as ecosystem services, recreation, etc. For businesses that provide guide services such as rafting, fishing and bird watching, or those dependent on dilution for waste removal, there could be a very minor impact. However, given the limited size of the reservation and the expected impact on streams, ecology anticipates that the proposed rule would have a negligible impact on businesses which depend on the in-stream flow.

     E. Metering: The requirement to meter water use was set in chapter 173-173 WAC, a rule that already exists and costs were considered there. Water source metering under chapter 173-173 WAC has only been required on water users withdrawing water authorized under water right permits, certificates and claims, and not for users using permit exempt ground water wells, except in certain locations with depressed or critical salmon stocks. WRIA 3 and 4 has several depressed or critical salmon stocks. Despite the presence of depressed or critical salmon stocks in some areas of the basin, ecology acknowledges that requiring water source meters changes current practices, regardless of the existing requirements. The change may result in costs to individuals and businesses using permit exempt wells that were not previously required to meter. Business users of permit exempt well water will likely experience the "in pipeline" costs outlined in the SBEIS for chapter 173-173 WAC in 2001.

     However, the metering will help other businesses obtain water. Actual use is likely to be less than the maximum allowed use outlined in the rule amendment proposal. When calculating what water is available for a new applicant, the actual use rather than the standard accounting value can be subtracted from the total available water to determine whether there is enough water for a new water user. Thus, the metering allows more accurate accounting of water use, which can result in more users having access to water from within the reservation. Thus, in the long term, the metering significantly reduces costs to those who would otherwise be without water.

     3. Costs to Businesses by Listed Type of Cost: Most costs for this proposal do not fit neatly into the cost categories listed in chapter 19.85 RCW. The costs are easier to understand as they affect water projects. The water projects themselves can include many of the listed items such as reports, records, professional services, equipment, supplies, labor, administration, and sometimes foregone revenue. However, they also include land use and water rights transfers, which are not listed in the RCWs. Professionals in these fields are comfortable talking about "installed costs" which may include everything above. Thus, the costs in this document are not parsed out to the listed costs. Rather, they are estimated under the part of the rule that generates the cost or gain. Further, businesses will experience very different impacts, either gains or losses, from the proposed rule amendment, depending on the place, the time, and what they wish to do with the water.

     Reporting and Recordkeeping: Metering is required under chapter 173-173 WAC. The requirement is not new but it represents a change for permit exempt wells from current practices. The department anticipates implementing the rule to minimize reporting and record-keeping costs associated with metering, such as having a local entity read and record the meter readings. The department cannot significantly change the reporting standards since they are outlined in a different WAC. Additionally, metering can potentially allow more users to access the reservation, if most water users consume less water than the default water use figures.

     Additional Professional Services: Most affected projects will require some form of professional service. There is the potential for both increased and decreased costs.

     Costs of Equipment, Supplies, Labor, and Increased Administrative Costs: These costs may be reduced or increased, depending on the impact of the rule for a specific business. Once the closures are in effect, some businesses may have costs associated with either public water hookups, developing tanks and pipelines for storage, or construction of mitigation options. These costs are not called out separately but are included in the descriptions below. However, more companies should save these same costs if they can make use of the uninterruptible reservations.

     Revenue Impacts: Revenue impacts could be experienced if a company has to wait to "open for business" because of an indirect effect of the proposed rule amendment.

     (a) Example of a gain: Under the existing rule, if a company finds that its potential gain for an option is less than the cost of mitigation or a water right transfer, then the revenue associated with that option would be foregone. However, this option value is, by definition, less than the value of the mitigation. In most cases, and in most places, the proposed amendments should reduce this kind of "income potential" loss.

     (b) Example of a loss: Closures may cause business to forgo the potential net income from an option they might have exercised.

     (c) Example of a loss: Those required to connect to water systems to obtain new or additional water could also experience an increased cost through waiting for water and foregoing the potential for revenue for a time. However, this is likely to be a limited number of entities since connection may already be the preferred alternative.

     (d) To the extent that increased costs yield increased prices for businesses, gross revenues could be reduced. This scenario assumes that the business in question has sufficient market power to affect market clearing prices. Offsetting this is the net benefit to businesses that will now be able to get water during periods of low flows via the reservation and avoid expensive on-site storage or other mitigation alternatives. This will likely lower costs to some potential water users and, to that extent, may increase revenues.

     Other Compliance Requirements: The scenarios that may create costs not explicitly listed in chapter 19.85 RCW are the same as those listed under Revenue Impacts above. Potential costs also include effects of land use on the value of land. For businesses that require water for location specific activities, this might change the highest-valued use of the land. Water users in these locations are already required to curtail use during low flow periods. This makes irrigation, or other business uses, difficult without transfers of uninterruptible rights or the expense of supplemental storage. However, evaluation of past permitted uses by businesses indicates that the predominant uses are for multiple domestic systems and irrigation. Since 1985, ecology has issued an average of approximately two permits to business entities per year. The majority were issued prior to 1992. Only one permit has been issued since 2001, under the existing rule. In these areas, domestic uses under the proposed rule amendments would still be served by individual wells through the reservation. Thus, the possibility of a land value shift only remains likely for agriculture. Forecast agricultural demand is greater than the reservation. Some agriculture will not be able to obtain water from the 10 cfs that is reserved for agriculture. For those entities, future irrigation uses should be similar under both the existing and the proposed rule amendments since permits under the existing rule would already be interruptible. The interruption periods already generally fall during the most important irrigation periods.

     4. List of Affected Industries: No industries are required to comply with the proposed rule amendment unless they seek to obtain new water rights in the covered area. However, requirements affecting water use are likely to translate into changes in costs, benefits, and property values based on impacts to the highest valued uses in the watershed. As such, existing business owners of undeveloped property are likely to be the industries that will be "required to comply" either directly, in terms of attempting to acquire water, or indirectly in terms of changes in asset values. Therefore, the following list is provided indicating standard industrial classification (SIC) codes for existing developable properties in the Skagit watershed.¹

Table 4.1. Industries

SIC Code	Description	SIC Code	Description
0181	Ornamental Nursery Products	5143	Dairy Products, Nec. Dried or Canned
0191	General Farms, Primarily Crop	5148	Fresh Fruits and Vegetables
0241	Dairy Farms	5154	Livestock
0652	Unassigned	5172	Petroleum Products, Nec.
0783	Ornamental Shrub and Tree Services	5191	Farm Supplies
1521	Single-family Housing Construction	5193	Flowers and Florists' Supplies
1611	Highway and Street Construction	5221	Unassigned
1794	Excavation Work	5261	Retail Nurseries and Garden Stores
2011	Meat Packing Plants	5271	Mobile Home Dealers
2015	Poultry Slaughtering and Processing	5399	Miscellaneous General Merchandise Stores
2411	Logging	5431	Fruit and Vegetable Markets
2421	Sawmills and Planing Mills, General	5499	Miscellaneous Food Stores
2441	Nailed Wood Boxes and Shook	5541	Gasoline Service Stations
2653	Corrugated and Solid Fiber Boxes	5941	Sporting Goods and Bicycle Shops
2951	Asphalt Paving Mixtures and Blocks	6021	National Commercial Banks
4011	Railroads, Line-haul Operating	6162	Mortgage Banks and Correspondents
4213	Trucking, Exceptional	6515	Mobile Home Site Operators
4222	Refrigerated Warehousing and Storage	6531	Real Estate Agents and Managers
4225	General Warehousing and Storage	6552	Subdividers and Developers, Nec.
4492	Towing and Tugboat Service	6792	Oil Royalty Traders
4812	Radiotelephone Communications	7032	Sporting and Recreational Camps
4899	Communication Services, Nec.	7033	Trailer Parks and Campsites
4924	Natural Gas Distribution	7992	Public Golf Courses
4925	Mixed, Manufactured or Liquefied Petroleum Gas Production	7999	Amusement and Recreation, Nec.
4941	Water Supply	8322	Individual and Family Services
5031	Lumber, Plywood, and Millwork	8641	Civic and Social Organizations
5032	Brick, Stone and Related Materials	8661	Religious Organizations
5099	Durable Goods, Nec.

     5. Calculation of Business Benefits and Compliance Costs: The dominant expected business impact is the benefit provided by access to water through the reservation. This would constitute a cost-reducing feature under RCW 19.85.030.

     Disproportional Costs/Benefits to Small Business: The distribution of compliance costs can be analyzed by evaluating previous water right permits and existing business-owned developable parcels. In the past, permitted business water uses have been predominately small businesses as defined by chapter 19.85 RCW. Since 1985, approximately thirty-seven permits have been issued to businesses or private owners for irrigation. Of those permits only two have been for large businesses. However, all permits issued previously except one were issued prior to 1992 and the existing in-stream flow rule. Permitted users authorized since the current rule was adopted must restrict use or mitigate during low flow periods making the interruptible water relatively less desirable than the uninterruptible water obtained before the existing rule was put in place. Therefore, the historical rate of permits may overstate the expected number of future permits. However, it is still reasonable to anticipate that a majority of future applications will also be from small businesses.

     The reservation will yield a net benefit to most business-owned parcels in the basin since on-site storage will no longer have to be provided in order to convert an interruptible right into water that can be used year-round. The exact amount will depend on the size of parcels, ownership, business size and zoning; the distribution of benefits (avoided costs) is shown in Table 5.1.

Table 5.1. Distribution of Benefits (Avoided Costs) for Business-Owned Exempt Well Development²

	Number of Businesses3		Average Employment (No. of Employees)	Average Benefit per Employee 4($1000)		Median Benefit Per Employee ($1000)
Small Businesses	45		6-15	497.0		55.5
Large Businesses	12		273-699	16.4		16.4

     The numbers in Table 5.1 represent the average avoided storage costs (net benefits) for small and large businesses. As can be seen in Table 5.1, it appears likely that most businesses will benefit from the proposed rule amendment and that small businesses will benefit disproportionately. These values represent the median avoided cost. For small businesses it exceeds that for large businesses by a factor of 3.4. It is important to note that the large avoided costs are based on the assumption of full development of all parcels. If a business (small or large) developed only a portion of their parcels, then the avoided costs would be smaller. Regardless, the data suggests that the impacts of the proposed rule amendment will be disproportionately beneficial to small businesses.

     If a business with land near a tributary decides to develop after the tributary is closed this ratio may reflect the relative costs rather than a gain.

     Access to Water: If an agricultural business is unable to access water from the reservation, the approximate value of an uninterruptible acre foot of water is $65 per year. Based on this, on a per acre foot basis, the cost of lack of access to water is disproportionate. Thus, the impact on agriculture will depend on whether the farm obtains water. For a farm obtaining an acre foot from the reservation, the impact is disproportionate and positive. For a farm, unable to obtain an acre foot due to a closure, the impact is disproportionate and a loss. For farms obtaining water from the reservation, the gain is disproportionate at the same rates.

Table 5.2. Distribution of Impact for 1 AF of Water

Farms by value of sales:	Number of farms		Value of an AF
Less than $2,500	345		$ 1.3000
$2,500 to $4,999	69		$ 0.4334
$5,000 to $9,999	79		$ 0.5418
$10,000 to $24,999	98		$ 0.0929
$25,000 to $49,999	42		$ 0.0433
$50,000 to $99,999	55		$ 0.0217
$100,000 or more	184		$ 0.0325

Income distribution based on 2002 Census of Agriculture for Skagit County

    
     Hookups: The costs of connecting to an existing system can range from $8,000 to $35,000 depending on the complexity. However, some of that cost (all, in some cases) will likely be returned via latecomer agreements. A well with storage can easily cost $40,000 to $50,000 depending on the depth of the well, geology and tank type. On-site storage for a low flow period can cost approximately $25,000-$30,000 by itself⁵. For most businesses, this makes connecting to the system the less expensive alternative. This will create an extra step for those wishing to obtain a water right. Even if a business happens to be in an area with a high water table, and happens to be located exactly the maximum distance from the water supply line and happens to need the smallest possible storage, then the hook up may cost more. The cost differential would, in this instance, be small. This cost is unlikely to vary based on employment. It will therefore, by definition, impose a disproportionate cost if two companies large and small have similar circumstances.

     Metering: Metering is required by chapter 173-173 WAC. The metering WAC was evaluated in 2001 at the time of adoption. The numbers below are a quote from that SBEIS as published by the code reviser. Most of the meters referenced in the proposed rule amendment will be on pipe. The costs are disproportionate, however, the gain to the additional small businesses which will then be able to obtain water will also be disproportionate. The costs outlined in the SBEIS for the 2001 metering rule found a disproportionate impact and are as follows:

     The impacts of the amortized costs of the metering and measuring devices and systems were calculated per $100 of revenue as shown in the table below. The estimated impacts are generally disproportionate with respect to small businesses, but are not large relative to revenues in either case.

COSTS PER $100 OF REVENUE (2001 DOLLARS)
     PIPEFLOW

SIC Group	Small Businesses		Large Businesses
01 - 02	$	0.06	$	0.003
15		0.05		0.0001
20		0.01		0.0002
24		0.08		0.002
26		0.08		0.0002
28		0.06		0.0001
32		0.02		0.0009

     As was explained above, insofar as these metering costs provide additional permits under the reservation, there will be a gain to business.

     6. Cost Reducing Features:

     Reducing, Modifying, or Eliminating Substantive Regulatory Requirements: This proposed rule amendment reduces the substantive requirement that exists now for some water right holders, who must cease use during low flow.

     Simplifying, Reducing, or Eliminating Record-keeping and Reporting Requirements: More record keeping is required under this proposed rule amendment due to metering. However, it will likely create further water availability which is a larger gain.

     Reducing the Frequency of Inspections: This proposed rule amendment creates more inspections by individuals of their water meters. However, this is part of what will likely create further water availability which is a larger gain.

     Delaying Compliance Timetables: Some companies will no longer have to stop using water during low flows, thus eliminating a compliance timetable.

     Reducing or Modifying Fine Schedules for Noncompliance: It is not legal to do this.

     Any Other Mitigation Techniques: See above.

     7. Conclusions: All impacts, positive and negative, are disproportionate. This proposed rule amendment constitutes a cost-reducing addition to the existing rule. This proposed rule amendment maximizes the net benefits to out-of-stream users from the available water. These users include businesses. The small businesses reap a disproportionate share of the net gain from this rule. Some businesses may experience costs associated with closures, monitoring, or hook ups. There is a remote possibility that some businesses dependent on river flows will experience costs. However, the dominant impact should be to reduce costs for businesses, especially the small ones.

     8. How Was Small Business Involved in the Development of this Rule? The proposed rule amendment has been developed relatively quickly under a court order and is based on conversations during the past two years with local governmental and tribal stakeholders. After the filing of the CR-102, official public hearings will be held to consider the proposal and allow small businesses to provide additional input.

¹ The table was constructed based on data provided by the Skagit County assessor and by the Washington State Employment Security Department.

² Costs assume full development of all business-owned developable parcels at a cost of $30,000 per well/storage unit. Based on businesses in Skagit and Snohomish counties for which employment, acreage and number of potential wells could be estimated.

³ The total number of businesses represents all businesses located in the county listed as owner of the parcel and where Employment Security data could be located.

⁴ Cost comparisons use the largest 10% of businesses required to comply.

⁵ Cost assumes two-15,000 gallon underground potable-water rated tanks.

     A copy of the statement may be obtained by contacting Jacque Klug, Department of Ecology, Northwest Regional Office, 3190 160th Avenue S.E., Bellevue, WA 98008, phone (425) 649-7124, fax (425) 649-7098, e-mail jklu461@ecy.wa.gov.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Jacque Klug, Department of Ecology, Northwest Regional Office, 3190 160th Avenue S.E., Bellevue, WA 98008, phone (425) 649-7124, fax (425) 649-7098, e-mail jklu461@ecy.wa.gov.

October 28, 2005

Polly Zehm

Deputy Director

OTS-7748.6

AMENDATORY SECTION(Amending [Order 99-05, filed 3/14/01,] effective 4/14/01)

WAC 173-503-010   General provision.   These rules apply to waters within the Lower and Upper Skagit water resources inventory area (WRIA 3 and 4), as defined in WAC 173-500-040, excluding the Samish River subbasin, and any islands surrounded by saltwater including Fidalgo, Guemes, Cypress, Hope and Goat islands. This chapter is promulgated pursuant to chapter 90.54 RCW (Water Resources Act of 1971), chapter 90.22 RCW (Minimum water flows and levels), and chapter 173-500 WAC (Water resources management program).

[Statutory Authority: Chapters 90.54 and 90.22 RCW, and chapter 173-500 WAC. 01-07-027 (Order 99-05), § 173-503-010, filed 3/14/01, effective 4/14/01.]

     Reviser's note: The bracketed material preceding the section above was supplied by the code reviser's office.
AMENDATORY SECTION(Amending Order 99-05, filed 3/14/01, effective 4/14/01)

WAC 173-503-020   Purpose.   The purpose of this chapter is to retain perennial rivers, streams, and lakes in the Lower and Upper Skagit water resources inventory area ((and)), including the Cultus Mt. Tributaries, with instream flows and levels necessary to provide for the protection and preservation of wildlife, fish, scenic, aesthetic, and other environmental values, and navigational values, as well as recreation and water quality. In addition, these flows are necessary to satisfy stock watering requirements, as consistent with RCW 90.22.040.

     Chapter 90.54 RCW (Water Resources Act of 1971) requires that utilization and management of waters of the state be guided by a number of fundamentals, including:

     Uses of water for domestic, stock watering, industrial, commercial, agricultural, irrigation, hydroelectric power production, mining, fish and wildlife maintenance and enhancement, recreational, and thermal power production purposes, and preservation of environmental and aesthetic values, and all other uses compatible with the enjoyment of the public waters of the state, are declared to be beneficial. (RCW 90.54.020(1))

     The quality of the natural environment shall be protected and, where possible, enhanced, as follows:

     Perennial rivers and streams of the state shall be retained with base flows necessary to provide for the protection and preservation of wildlife, fish, scenic, aesthetic and other environmental values, and navigational values. Lakes and ponds shall be retained substantially in their natural condition. Withdrawals of water which would conflict therewith shall be authorized only in those situations where it is clear that overriding considerations of the public interest will be served. (RCW 90.54.020 (3)(a))

     Waters of the state shall be of high quality. Regardless of the quality of the waters of the state, all wastes and other materials and substances proposed for entry into said waters shall be provided with all known, available, and reasonable methods of treatment prior to entry. Notwithstanding that standards of quality established for the waters of the state would not be violated, wastes and other materials and substances shall not be allowed to enter such waters which will reduce the existing quality thereof, except in those situations where it is clear that overriding considerations of the public interest will be served. (RCW 90.54.020 (3)(b))

     ((In administering and enforcing this regulation, the department's actions shall be consistent with the provisions of chapter 90.54 RCW.)) In furtherance of these statutory objectives, this chapter creates a reservation of a limited amount of water for specific future uses. It establishes closures for tributaries, and sets forth conditions for future water right permitting.

[Statutory Authority: Chapters 90.54 and 90.22 RCW, and chapter 173-500 WAC. 01-07-027 (Order 99-05), § 173-503-020, filed 3/14/01, effective 4/14/01.]

     "Agricultural irrigation" means the application of water to crops grown for commercial agricultural purposes.

     "Allocation" means the designation of specific amounts of water for specific beneficial uses.

     "Appropriation" means the process of legally acquiring the right to use specific amounts of water for beneficial uses, as consistent with the ground and surface water codes and other applicable water resource statutes. This term refers to both surface and ground water right permits and to ground water withdrawals otherwise exempted from permit requirements under RCW 90.44.050.

     "Commercial/industrial use" means use of water for the purpose of business activities, including human domestic needs, manufacturing or production activities and maintenance of vegetated areas on the business property.

     "Consumptive use" means a use of water whereby there is a diminishment of the water source.

     "Department" means the Washington state department of ecology.

     "Domestic water use" means, for the purposes of administering WAC 173-503-073 and 173-503-074, potable water to satisfy the human domestic needs of a household or business, including water used for drinking, bathing, sanitary purposes, cooking, laundering, care of household pets, and other incidental uses. For permit-exempt domestic water use of ground water sources, total outdoor watering for multiple residences shall be consistent with the ground water permit exemption provisions in RCW 90.44.050.

     "Instream flow" means a stream flow level set in rule that is needed to protect and preserve fish, wildlife, scenic, aesthetic, recreation, water quality, and other environmental values, and navigational values. The term "instream flow" means a base flow under chapter 90.54 RCW, a minimum flow under chapter 90.03 or 90.22 RCW, or a minimum instream flow under chapter 90.82 RCW.

     "Maximum average consumptive daily use" means the use of water measured over the highest period of use divided by the number of days in that period, less the return flow recharge credit.

     "Mitigation plan" means a scientifically sound plan voluntarily submitted by a project proponent to offset the impacts of a proposed water use and approved by the department. A mitigation plan can be submitted to the department for a stream, basin, reach, or other area. To gain departmental approval, a mitigation plan must show that the proposed withdrawal with mitigation in place provides water-for-water mitigation and will not impair senior water rights, including instream flow rights, diminish water quality or withdraw water from a legally closed source. The plan must include monitoring and reporting and provide mitigation for the duration of the water use.

     "Municipal water supplier" means an entity that supplies water for municipal water supply purposes. (RCW 90.03.015)

     "Municipal water supply purposes" means a beneficial use of water as defined in RCW 90.03.015, including:

     (a) For residential purposes through fifteen or more residential service connections or for providing residential use of water for a nonresidential population that is, on average, at least twenty-five people for at least sixty days a year;

     (b) For governmental or governmental proprietary purposes by a city, town, public utility district, county, sewer district, or water district; or

     (c) Indirectly for the purposes in (a) or (b) of this subsection through the delivery of treated or raw water to a public water system for such use.

     "Nonconsumptive use" means a type of water use where either there is no diversion from a source body, or where there is no diminishment of the source.

     "Permit-exempt withdrawals" or "permit exemption" means a ground water withdrawal exempted from permit requirements under RCW 90.44.050, but which is otherwise subject to the ground water code.

     "Public water system" means any system established under RCW 43.20.260 which provides water for human consumption through pipes or other constructed conveyances, excluding a system serving only one single-family residence and a system with four or fewer connections all of which serve residences on the same farm. This term includes group domestic systems.

     "Reservation" means an allocation of water for future beneficial uses. The priority date of a given allocation from the reservation is the same as the effective date of rulemaking that established the reservation.

     "Scientifically sound" means adhering to the requirements of best available science as defined in WAC 365-195-905 (5)(a) and (b).

     "Stream management unit" means a stream segment, reach, or tributary used to describe the part of the relevant stream to which a particular instream flow level applies. Most of these units contain a control station.

     "Subbasin management unit" means a stream segment, reach, or tributary basin, used to describe where a particular instream flow level, water reservation budget, or water diversion or withdrawal limit applies.

     "Timely and reasonable manner" means the way in which potable water service can be provided by a public water system to a property as defined in local coordinated water system plans, or by public water systems or local legislative authorities.

     "Withdrawal" means the appropriation or use of ground water, or the diversion or use of surface water.

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     (2) The department will notify the public of effective stream closures through publication of a notice in a newspaper of general circulation for the region.

     (3) Exceptions to the closures and instream flow requirements are provided in WAC 173-503-060, 173-503-073, 173-503-074 and 173-503-075.

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     (2) All appropriations in each Upper Skagit tributary subbasin identified in Figure 5 of WAC 173-503-120 are to be from ground water sources only and limited to a maximum average consumptive daily use of 0.04 cfs or 25,851 gallons per day. These uses will be debited against the Upper Skagit subbasin reservation quantity.

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     (6) Any authorization for new beneficial uses must require development on a timeline that shows reasonable progress and due diligence.

[Statutory Authority: Chapters 90.54 and 90.22 RCW, and chapter 173-500 WAC. 01-07-027 (Order 99-05), § 173-503-060, filed 3/14/01, effective 4/14/01.]

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     Based on this finding, the department hereby reserves specific quantities of an amount of surface and ground water, which can be allocated for specific future beneficial uses. These reservations of water are not subject to the instream flows established in WAC 173-503-040 or closures established in WAC 173-503-051. Uses of the water under the reservation are available only if all the conditions set forth in this section are fully complied with:

     (a) Agricultural irrigation reservation. A reservation of ten cubic feet per second (10 cfs) or 3,564 acre-feet annually, is available for agricultural irrigation purposes not subject to the instream flows.

     (b) Domestic, municipal, commercial/industrial and stockwatering water supply reservation. A reservation of fifteen cubic feet per second (15 cfs) or 10,840 acre-feet annually, is available for domestic, municipal, stock watering or commercial/industrial water supply not subject to the instream flows.

     (2) Conditions for use of the reserved agricultural irrigation water are as follows:

     (a) The reservation is available for both ground and surface water and is only available from a source in the Lower, Middle or Upper Skagit River subbasin management units.

     (b) The reservation shall be only for the purpose of agricultural irrigation, as defined in WAC 173-503-025.

     (c) A water right for use from the reservation must be obtained from the department.

     (d) Water use will be authorized for only the irrigation season, unless the applicant can demonstrate to the department's satisfaction a need for a continuous, year-round, irrigation demand.

     (e) A measuring device (water source meters) must be installed and maintained on the water source in accordance with specifications provided by the department and report the data to the department in accordance with the permit requirements.

     (f) The department will maintain an estimate of the amount of water used from the reservation based on water rights issued by the department and actual measured water use.

     (g) Agricultural irrigation water rights obtained under this reservation are limited to irrigation purposes only. The purpose of use of a water right obtained under the agricultural irrigation reservation cannot be changed. In the event that the water use authorized under a water right from the reservation is no longer desired or has been abandoned, the department will credit the quantity of water previously used back to the reservation for that purpose, upon notification of abandonment to the department.

     (3) Conditions for use of the reserved domestic, municipal, commercial/industrial, and stock watering water reservation are as follows:

     (a) The reservation shall be only for the purpose of domestic water use, municipal, commercial/industrial, or stockwatering water use as defined in WAC 173-503-025. It is available to users exempt from the permitting process and to users requiring a water right, as outlined in WAC 173-503-060.

     (b) This reserve of water shall be allocated based on the subbasin management units established in WAC 173-503-074. The water source must be a ground water well if the source is located in a subbasin management unit tributary to the Skagit River and is subject to availability of water in the reservation and the conditions of use of the reservation. A surface water source can be used only if: The source is located in the Upper, Middle or Lower Skagit subbasin management units; the source meets the conditions of the reservation, and use of the source is approved by the department through a water right permit. For sources located in identified tributaries in the Upper Skagit subbasin management unit in Figure 5 of WAC 173-503-120, water use is limited to only ground water sources, and is limited to a maximum daily use of 0.4 cfs or 25,851 gallons per day, debited from the total Upper Skagit subbasin management unit reservation.

     (c) Domestic water use shall meet the water use efficiency standards of the uniform plumbing code as well as any applicable local or state requirements for conservation standards.

     (d) All users, including permit exempt users, under the reservation shall install and maintain a measuring device (water source meter), in accordance with specifications provided by the department. The water user must provide a reasonable right of inspection, allow the meter to be read, and report the data to the department or a designated local entity.

     (e) This reservation shall be administered and accounted for by the department in consultation with local governmental authorities.

     (f) A new withdrawal under this reservation is not allowed in areas where a municipal water system has been established and a connection can be provided in a timely and reasonable manner. If an applicant for a building permit or subdivision approval cannot obtain water through a municipal system, the applicant must obtain a letter from a public water supplier prior to drilling a well which states that service was denied. Such a denial shall be consistent with the criteria listed in RCW 43.20.260.

     (g) For users utilizing a permit-exempt ground water source, water use shall be consistent with the provisions in RCW 90.44.050.

     (4) It shall be the responsibility of an applicant for a building permit or subdivision approval seeking water under the reservation to comply with the conditions in WAC 173-503-073(3) and all other conditions of this chapter.

     (5) The reservations are a one-time, finite resource. Once the reservations are fully allocated, they are no longer available and the subbasin management units are closed, except for the Upper, Middle and Lower Skagit subbasin management units. New water sources, including permit exempt wells, may be available only under the provisions in WAC 173-503-060, 173-503-081, 173-503-100 and 173-503-110.

     The department shall notify the appropriate county, in writing, when it determines that fifty percent, seventy-five percent, and one hundred percent of the reservation for each subbasin management unit has been allocated. The department shall also issue a public notice annually in a newspaper of general circulation for the region that shows the amount of reserved water for each subbasin management unit that has been allocated, remains unallocated, and any subbasin management units that have been fully allocated and from which water is no longer available under these reservations.

     (6) If a water use authorized from the reservations is not in compliance with any condition of these reservations, the department may take action consistent with WAC 173-503-090.

     (7)(a) A record of all withdrawals from the domestic, municipal, stock watering, and commercial/industrial reservation shall be maintained by the department. The record will readily show both the allocated and unallocated quantities of water that are in reserved status.

     (b) All uses of this reservation shall be debited against the reservation, regardless of whether the source is an interruptible or uninterruptible water use. The department will account for water use under the reservation based on actual measured water use. If actual measuring data are not available, the department will account for water use using 800 gallons per day for each domestic or municipal connection or 5,000 gallons per day for a commercial/industrial use, until actual measured use is available. Additionally, the department reserves the right to account for water use based on the best available information contained in well logs, water availability certificates issued by the counties, water rights issued by the department, public water system approvals or other documents.

     (c) For water users using on-site septic systems, fifty percent of the water used will be credited to the reservations for recharge from on-site septic systems. The on-site septic system credit will be removed for water users that are subsequently converted to sewer systems.

     (d) If a water user under the reservation subsequently abandons the withdrawal, the department will credit back to the reservation the actual amount of water used and debited from the reservation, upon demonstration to the department that the well or surface water source has been decommissioned through written notification of the abandonment.

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Table 1

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     (b) If education and technical assistance do not achieve compliance, the department shall issue a notice of violation, a formal administrative order under RCW 43.27A.190, or assess penalties under RCW 43.83B.336, 90.03.400, 90.03.410, 90.03.600, 90.44.120 and 90.44.130.

[Statutory Authority: Chapters 90.54 and 90.22 RCW, and chapter 173-500 WAC. 01-07-027 (Order 99-05), § 173-503-090, filed 3/14/01, effective 4/14/01.]

     • Establishment of a trust water rights program.

[Statutory Authority: Chapters 90.54 and 90.22 RCW, and chapter 173-500 WAC. 01-07-027 (Order 99-05), § 173-503-100, filed 3/14/01, effective 4/14/01.]

     (2) The determination of how much water should be allocated between future out-of-stream uses and the restoration and enhancement of instream flows will be made at the time the water is acquired and deposited into the trust water rights program.

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     The following section of the Washington Administrative Code is repealed:

WAC 173-503-080

Policy statement for future permitting actions.

© Washington State Code Reviser's Office