BILL REQ. #:  Z-0507.1 

Read first time 01/22/2003.   Referred to Committee on Agriculture & Natural Resources.

     AN ACT Relating to certainty and flexibility of municipal water rights and efficient use of water; amending RCW 90.03.015, 90.14.031, 90.03.330, 90.03.260, 90.03.386, 43.20.250, 90.48.495, 90.48.112, and 90.46.120; adding new sections to chapter 90.03 RCW; adding a new section to chapter 90.14 RCW; adding a new section to chapter 43.20 RCW; adding a new section to chapter 70.116 RCW; adding a new section to chapter 70.119A RCW; adding new sections to chapter 90.44 RCW; adding new sections to chapter 90.82 RCW; and creating a new section.

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

NEW SECTION.  Sec. 1   (1) The legislature finds that municipal water suppliers need greater certainty for their municipal water rights in order to effectively meet their obligations under approved water system plans, growth management plans, and other land use plans. The legislature further finds that greater flexibility is needed in the exercise of municipal water supplier's water rights to effectively implement watershed, basin, and regional water management plans developed under chapter 90.82 RCW and under other authorities.
     (2) It is the legislature's intent to provide additional certainty for municipal water rights, in conjunction with establishing clear requirements for the efficient use of the state's water resources.
     (3) Further, it is the legislature's intent that municipal water suppliers with water rights, the sources of which are located within watershed planning areas, be allowed under certain conditions to:
     (a) Change or transfer unperfected amounts of water under such rights;
     (b) Develop new rights or change or transfer existing rights that would impact stream flows if appropriate mitigation is provided; and
     (c) Enter into contracts with the department of ecology to assist in implementing the objectives of watershed plans, basin plans, or regional water management plans.
     (4) In providing certainty and flexibility for municipal water rights, the legislature further intends that:
     (a) Water resources be managed to ensure the safe supply of water for drinking and sanitation needs for all citizens of the state;
     (b) Valid rights to the use of water, both for instream and out-of-stream purposes be protected;
     (c) Water resources be managed to ensure preservation of environmental values, including instream resources;
     (d) Water supplies be managed to meet planned growth, and growth must be planned to responsibly address water supplies;
     (e) Water resources be managed to ensure both efficient use of water and efficient use of financial resources to secure affordable supplies; and
     (f) Water resource management decisions be made within a broad context of local community and state interests.

Sec. 2   RCW 90.03.015 and 1987 c 109 s 65 are each amended to read as follows:
     ((As used in this chapter:)) The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Department" means the department of ecology((;)).
     (2) "Director" means the director of ecology((; and)).
     (3) "Municipal water supplier" means:
     (a) A city or town;
     (b) A county appointed as the receiver of a failing water system under RCW 43.70.195, approved as a satellite management agency under RCW 70.116.134, or that delivers water resulting from the reclamation and reuse of water under chapter 90.46 RCW; or
     (c) A purveyor, as defined in RCW 70.119A.020, that:
     (i) Is approved by the department of health to serve either existing service connections, or additional service connections, or both;
     (ii) Is serving water to supply customers and users to the extent allowed under an applicable land use plan;
     (iii) Is in compliance with water system planning requirements established under chapter 43.20 or 70.116 RCW; and
     (iv) Provides water to one or more public water systems that regularly serves fifteen or more residential connections, or twenty-five or more residents for one hundred eighty days or more per year.
     (4) "Municipal water supply purposes" means any beneficial use for which water is provided by a municipal water supplier, and any water rights held by cities, towns, or counties for use in their own operations. Beneficial uses of water under a municipal supply purpose right may include water diverted or withdrawn for:
     (a) Uses that are designed to benefit fish and wildlife, water quality, or other instream resources or related habitat values; or
     (b) Uses that are called for by an approved watershed plan adopted under chapter 90.82 RCW or similar plan adopted under RCW 90.54.040(1), a habitat conservation plan prepared in response to an endangered species listing, or a comprehensive irrigation district management plan.
     (5) "Person" means any firm, association, water users' association, corporation, irrigation district, or municipal corporation, as well as an individual.

NEW SECTION.  Sec. 3   A new section is added to chapter 90.03 RCW to read as follows:
     (1) Only a municipal water supplier may hold a surface or ground water right for municipal water supply purposes. For irrigation districts that provide public water supplies under approval of the department of health, only those rights or portions thereof that are used for public water supply are water rights for municipal water supply purposes.
     (2) If a municipal water supplier acquires an existing surface or ground water right that is a municipal water supply purpose right, the right will remain as a municipal supply purpose right. If a municipal water supplier acquires an existing surface or ground water right that is not a municipal supply purpose right, the right may be changed to municipal water supply purposes upon the approval of the department in accordance with the water right change provisions of this chapter and the amendment provisions of chapter 90.44 RCW.
     (3) When requested by a municipal water supplier or when processing a change or amendment to the right, the department shall amend the water right documents and related records to ensure that municipal supply purpose rights are correctly identified.

NEW SECTION.  Sec. 4   A new section is added to chapter 90.14 RCW to read as follows:
     When a municipal water supplier acquires an existing water right that is not a municipal water supply purpose right, that right is not subject to relinquishment for nonuse occurring during the time that the acquirer diligently seeks the department's approval to change the right to municipal water supply purposes. Once a change to municipal water supply purposes is approved by the department, the right is thereafter subject to the exception from relinquishment in RCW 90.14.140(2)(d).

Sec. 5   RCW 90.14.031 and 1969 ex.s. c 284 s 12 are each amended to read as follows:
     ((Unless a different meaning is plainly required by the context, the following words and phrases as used in RCW 90.14.031 through 90.14.121 shall have the following meanings:))
     (1) The definitions in this subsection apply throughout this chapter unless the context clearly requires otherwise.
     (a) "Municipal water supplier" has the same meaning as defined in RCW 90.03.015.
     (b) "Municipal water supply purpose" has the same meaning as defined in RCW 90.03.015.
     (2) The definitions in this subsection apply throughout RCW 90.14.031 through 90.14.121 unless the context clearly requires otherwise.
     (a) "Person" shall mean an individual, partnership, association, public or private corporation, city or other municipality, county, or a state agency, and the United States of America when claiming water rights established under the laws of the state of Washington.
     (((2))) (b) "Beneficial use" shall include, but not be limited to, use for domestic water, irrigation, fish, shellfish, game and other aquatic life, municipal, recreation, industrial water, generation of electric power, and navigation.

Sec. 6   RCW 90.03.330 and 1987 c 109 s 89 are each amended to read as follows:
     (1) Upon a showing satisfactory to the department that any appropriation has been perfected in accordance with the provisions of this chapter, it shall be the duty of the department to issue to the applicant a certificate stating such facts in a form to be prescribed by ((him)) the director, and such certificate shall thereupon be recorded with the department. Any original water right certificate issued, as provided by this chapter, shall be recorded with the department and thereafter, at the expense of the party receiving the same, be transmitted by the department ((transmitted)) to the county auditor of the county or counties where the distributing system or any part thereof is located, and be recorded in the office of such county auditor, and thereafter be transmitted to the owner thereof.
     (2) A water right certificate for an inchoate water right, or for any portion of a water right that was or is inchoate, acquired by, held by, or issued to a municipal water supplier for municipal water supply purposes is considered a water right in good standing to the extent the water:
     (a)(i) Has been applied to beneficial use; or (ii) is needed to meet reasonably anticipated future needs, for a period not to exceed fifty years from the effective date of this section, as demonstrated pursuant to the rules adopted under section 11(7) of this act; and
     (b) The holder of the certificate is in compliance with all requirements of the water system plan or coordinated water system plan governing the municipal water supplier, including but not limited to the conservation element of the municipal water supplier's approved water system plan, as amended from time to time. If the certificate holder is not in compliance with the requirements of the water system plan or coordinated water system plan, the holder is prohibited from further expansion of water use under an inchoate right until the holder returns to compliance.
     (3) For the purposes of this section, a certificate for an inchoate water right is a water right certificate or a portion thereof that authorizes the use of water that has not been perfected through the actual beneficial use of water. By order of the department, a water right certificate held by a municipal water supplier for municipal water supply purposes under this subsection may be subject to requirements for metering, monitoring, and reporting water use, and for the installation of fish protection devices, as the department may deem appropriate.
     (4) Except as set forth in RCW 90.03.240, the department may not rescind, reissue, or supersede any water right certificate held by a municipal water supplier for municipal water supply purposes that documents a water right in good standing under the requirements in subsection (2) of this section, unless the water right holder requests the issuance of new water right documents that reflect the status of the water right perfected through beneficial use and the inchoate right remaining in good standing, or the department authorizes a change, transfer, or amendment of the water right under RCW 90.03.380 or 90.44.100. Nothing in this section prohibits the department from correcting ministerial errors in a water right certificate.
     (5) Any superseding water right certificate issued by the department under this section retains the original priority date for the water right and is not subject to an instream flow rule that has a junior priority date. When implementing the requirement to not impair existing water rights during a change, transfer, or amendment of a water right certificate under RCW 90.03.380 or 90.44.100, the department may condition the exercise of the water right, with the consent of the certificate holder, in order to avoid impairment of an instream flow right and to authorize the requested change, transfer, or amendment.
     (6) After the effective date of this section, the department shall issue a new certificate under subsection (1) of this section only for the perfected portion of a water right as demonstrated through actual beneficial use of water.

Sec. 7   RCW 90.03.260 and 1987 c 109 s 84 are each amended to read as follows:
     (1) Each application for permit to appropriate water shall set forth the name and post office address of the applicant, the source of water supply, the nature and amount of the proposed use, the time during which water will be required each year, the location and description of the proposed ditch, canal, or other work, the time within which the completion of the construction and the time for the complete application of the water to the proposed use.
     (2) If for agricultural purposes, ((it)) the application shall give the legal subdivision of the land and the acreage to be irrigated, as near as may be, and the amount of water expressed in acre feet to be supplied per season. If for power purposes, it shall give the nature of the works by means of which the power is to be developed, the head and amount of water to be utilized, and the uses to which the power is to be applied.
     (3) If for construction of a reservoir, ((it)) the application shall give the height of the dam, the capacity of the reservoir, and the uses to be made of the impounded waters.
     (4) If for community or multiple domestic water supply, the application shall give the projected number of service connections sought to be served. However, for a municipal water supplier that has an approved water system plan under chapter 43.20 RCW including a water system plan that is part of a coordinated water system plan approved under chapter 70.116 RCW that specifies a maximum number of service connections, the service connection figure in the application or any subsequent water right document is not an attribute limiting exercise of the water right.
     (5) If for municipal water supply, ((it)) the application shall give the present population to be served, and, as near as may be estimated, the future requirement of the municipality. However, for a municipal water supplier that has an approved water system plan under chapter 43.20 RCW including a water system plan that is part of a coordinated water system plan approved under chapter 70.116 RCW that specifies a maximum population, the population figures in the application or any subsequent water right document are not an attribute limiting exercise of the water right.
     (6) If for mining purposes, ((it)) the application shall give the nature of the mines to be served and the method of supplying and utilizing the water; also their location by legal subdivisions.
     (7) All applications shall be accompanied by such maps and drawings, in duplicate, and such other data, as may be required by the department, and such accompanying data shall be considered as a part of the application.

Sec. 8   RCW 90.03.386 and 1991 c 350 s 2 are each amended to read as follows:
     (1) Within service areas established pursuant to chapter((s)) 43.20 ((and)) or 70.116 RCW, the department of ecology and the department of health shall coordinate approval procedures to ensure compliance and consistency with the approved water system plan.
     (2) For a municipal water supplier that has an approved water system plan under chapter 43.20 RCW including a water system plan that is part of a coordinated water system plan approved under chapter 70.116 RCW that specifies a maximum number of service connections to be served under the approved water system plan, the maximum number of service connections or maximum population to be served specified on a water right application, permit, or certificate are not an attribute limiting exercise of the water right.
     (3) For the purposes of subsections (4) and (5) of this section, the appropriate authority for service area approvals is the department of health. Where the department of health has approved a coordinated water system plan under RCW 70.116.060(2), the appropriate authority may also be the local legislative authority.
     (4) The effect of the department of health's approval of a water system plan or water system plan amendment that describes a municipal water supplier's service area under chapter 43.20 RCW, or the local legislative authority's approval of service area boundaries in accordance with procedures adopted pursuant to chapter 70.116 RCW, is that the place of use of a surface water right or ground water right used by the municipal water supplier is equivalent to, and coexistent with, the approved service area provided that no impairment is found under the procedures in subsection (5) of this section.
     (5) If a municipal water supplier wants the place of use of a water right in its possession to be equivalent to and coexistent with their approved service area, the water right holder shall, within thirty days after submitting the request for service area approval to the appropriate authority as described in subsection (3) of this section, notify the department and publish notice as prescribed in the case of an original water right application in RCW 90.03.280.
     (a) The notice must state that any person who believes that a water right will be impaired as a result of the application of this section must submit a written claim of impairment to the department within thirty days of the last date of publication.
     (b) If no impairment claims are submitted within the specified time period, the service area approval by the appropriate authority as described in subsection (3) of this section has the effect of confirming that the place of use of the water right used to supply water to the service area is equivalent to and coexistent with the approved service area.
     (c) If one or more impairment claim is submitted within the specified time period, the department shall proceed to make a determination regarding the impairment claim or claims within sixty days of receipt of the claim or claims. The department shall issue its determination in writing, stating either that it finds that there will be impairment (a "finding of impairment") or that it finds there will not be impairment (a "finding of no impairment"). The department of ecology's written determination may be appealed to the pollution control hearings board as provided in chapter 43.21B RCW.
     (d) Final resolution of an impairment claim occurs at the expiration of the appeal period following a final determination by the department, the pollution control hearings board, and any reviewing court. If the appropriate authority as described in subsection (3) of this section approves the service area for which an impairment claim has been filed but has not yet been finally resolved or for which final resolution is a finding of impairment, approval has no effect on whether the place of use is equivalent to and coexistent with the approved service area. Upon final resolution of an impairment claim that results in a finding of no impairment, the place of use of the water right is equivalent to and coexistent with the service area approved by the appropriate authority as described in subsection (3) of this section.
     (e) An impairment claim based on alleged impairment to either an instream flow established by rule or a water right held by the state in trust for instream flow purposes may only be asserted by the department or the department of fish and wildlife.
     (6) A municipal water supplier shall implement cost-effective water conservation in accordance with its approved water system plan and shall make full utilization of the conserved water before utilizing any inchoate portion of water right certificates it may hold. When establishing or extending a surface or ground water right construction schedule under RCW 90.03.320, the department shall take into consideration the public water system's use of conserved water.

NEW SECTION.  Sec. 9   A new section is added to chapter 43.20 RCW to read as follows:
     The effect of a department approval of a water system plan or water system plan amendment under this chapter is that the place of use of a surface water right or ground water right used by the municipal water supplier is equivalent to, and coexistent with, the service area described in the system's water system plan provided that no impairment is found under the procedures in RCW 90.03.386(5).

NEW SECTION.  Sec. 10   A new section is added to chapter 70.116 RCW to read as follows:
     The effect of approval by the local legislative authority of a service area change for a public water system subject to a coordinated water system plan approved under this chapter is that the place of use of a surface water right or ground water right used by the municipal water supplier is equivalent to, and coexistent with, the service area described in the system's water system plan provided that no impairment is found under the procedures in RCW 90.03.386(5).

Sec. 11   RCW 43.20.250 and 2002 c 161 s 1 are each amended to read as follows:
     (1) Except as provided in subsection (2) of this section, for any new or revised water system plan submitted for review under this chapter, the department shall review and either approve, conditionally approve, reject, or request amendments within ninety days of the receipt of the submission of the plan. The department may extend this ninety-day time limitation for new submittals by up to an additional ninety days if insufficient time exists to adequately review the general comprehensive plan. For rejections of plans or extensions of the timeline, the department shall provide in writing, to the person or entity submitting the plan, the reason for such action. In addition, the person or entity submitting the plan and the department may mutually agree to an extension of the deadlines contained in this section.
     (2) The time limitations set forth in subsection (1) of this section do not apply to any new or revised water system plan that is subject to the requirements of RCW 90.03.386(3) if a claim of impairment is filed with the department of ecology.

NEW SECTION.  Sec. 12   A new section is added to chapter 70.119A RCW to read as follows:
     The department shall:
     (1) Develop water use efficiency requirements designed to ensure efficient use of water while maintaining system financial viability and improve affordability of supplies. Water use efficiency requirements must include conservation planning requirements, water loss standards, and procedures by which public water systems establish and adopt water conservation objectives.
     (2) Establish an advisory committee to assist the department in developing rules for water use efficiency. The advisory committee must include representatives from public water system customers, environmental interest groups, business interests groups, a representative cross section of public water systems required to prepare water conservation programs as part of their water system plans, tribal governments, the department of ecology, and any other members determined necessary by the department.
     (3) Provide technical assistance upon request to public water systems and local governments regarding water conservation, including, but not limited to, development of best management practices for water conservation programs, conservation landscape ordinances, conservation rate structures for public water systems, and general public education programs on water conservation.
     (4) Develop requirements for the conservation element of water system plans, developed under chapter 43.20 RCW or required as part of a coordinated water system plan under chapter 70.116 RCW. Conservation planning requirements must be varied based upon the size of the public water system and must include, but not be limited to, provisions that require the purveyor to:
     (a) Adopt conservation objectives in accordance with provisions of subsection (6) of this section;
     (b) Implement all measures determined by the public water system to be cost-effective and necessary to achieve the system's water conservation objectives. Provisions must allow utilities to select the best methods for achieving their conservation objectives. Public water systems are required to implement all conservation measures that provide water from conservation at or below the cost of development of new supplies;
     (c) Evaluate the use of rate structures to encourage conservation;
     (d) Evaluate systems' water loss and include a detailed plan for achieving water loss standards developed under subsection (5) of this section;
     (e) Provide water consumption and source production data sufficient to evaluate system conservation performance. Reporting periods and reporting requirements may vary based on the system size. Reporting must include reporting to the department and to the public; and
     (f) Include water demand forecasts developed in accordance with requirements established by the department.
     (5) Develop standards for water loss from public water systems. The standards for public water systems must consider system size and water system loss trends.
     (6) Establish procedures to be used by public water systems to establish and adopt water conservation objectives. Procedures must include, but not be limited to, provisions for:
     (a) Public notification and conduct of public meetings by the public water system prior to establishing conservation objectives;
     (b) Establishing a range of reasonably achievable reductions in consumption per equivalent residential unit, or other measurable criteria, over time; and
     (c) Establishing and revising conservation objectives. Consideration must be given to historic conservation performance and conservation investment, customer base demographics, regional climate variations, instream flow conditions, system financial viability, and affordability of water rates.
     (7) Develop water demand forecast methodology sufficient to meet the purposes of subsection (4) of this section and to be used in determining reasonably anticipated future needs for the purposes of RCW 90.03.330(2).
     (8) Establish provisions for either withholding approval of system expansion, or withholding state funding, or both, in cases where water systems fail to comply with the provisions of this section.
     (9) Adopt rules necessary to implement the provision of this section by December 31, 2005.

Sec. 13   RCW 90.48.495 and 1989 c 348 s 10 are each amended to read as follows:
     The department of ecology shall require sewer plans to include a discussion of water conservation measures considered or underway that would reduce flows to the sewerage system and an analysis of their anticipated impact on public sewer service and treatment capacity. The plans must consider the feasibility of providing assistance to implement water conservation measures as an alternative to constructing new or expanded treatment capacity.

Sec. 14   RCW 90.48.112 and 1997 c 444 s 9 are each amended to read as follows:
     The evaluation of any plans submitted under RCW 90.48.110 must include consideration of opportunities for the use of reclaimed water as defined in RCW 90.46.010. Wastewater plans submitted under RCW 90.48.110 must include a statement describing how applicable reclamation and reuse elements will be coordinated as required under RCW 90.46.120(2).

Sec. 15   RCW 90.46.120 and 1997 c 444 s 1 are each amended to read as follows:
     (1) The owner of a wastewater treatment facility that is reclaiming water with a permit issued under this chapter has the exclusive right to any reclaimed water generated by the wastewater treatment facility. Use and distribution of the reclaimed water by the owner of the wastewater treatment facility is exempt from the permit requirements of RCW 90.03.250 and 90.44.060. Revenues derived from the reclaimed water facility shall be used only to offset the cost of operation of the wastewater utility fund or other applicable source of system-wide funding.
     (2) If the proposed use or uses of reclaimed water are intended to augment or replace potable water supplies or create the potential for the development of additional potable water supplies, such use or uses shall be considered in the development of the regional water supply plan or plans addressing potable water supply service by multiple water purveyors. The owner of a wastewater treatment facility that proposes to reclaim water shall be included as a participant in the development of such regional water supply plan or plans.
     (3) Consistent with guidelines to be developed by the department of health, water system plans and coordinated water systems plans developed under chapter 43.20 or 70.116 RCW must be developed and coordinated to ensure that opportunities for reclaimed water are evaluated and that proposals for construction in public rights of way delineated within the plan consider infrastructure needed to distribute the reclaimed water. The requirements of this subsection (3) do not apply to water system plans developed under chapter 43.20 RCW for utilities serving less than one thousand service connections.

NEW SECTION.  Sec. 16   A new section is added to chapter 90.03 RCW to read as follows:
     (1) The right to use water under an unperfected municipal, community domestic, or multiple domestic water right or a portion thereof held by a municipal water supplier may be changed or transferred, in the same manner as is provided in RCW 90.03.380, if the change or transfer:
     (a) Is subject to stream flow protection or restoration requirements related to implementing a watershed plan approved under chapter 90.82 RCW or RCW 90.54.040(1), based on the proportionate share of the water user's effects on environmental resources, including instream flows;
     (b) Is subject to stream flow protection or restoration requirements contained in an approved habitat conservation plan, federal energy regulatory commission hydropower license, or comprehensive irrigation district management plan;
     (c) Is subject to a water management environmental contract established under section 20 or 21 of this act; or
     (d) Is needed to resolve or alleviate a public health or safety emergency caused by a failing public water supply system currently providing potable water to existing users.
     (2) To qualify for a change or transfer of right under the provisions of subsection (1)(a) or (b) of this section, the public water system operated by the applicant municipal water supplier must be certified by the state department of health to be in compliance with water conservation standards specified by the department of health as those standards may be amended in the future.
     (3) To qualify for a change or transfer of right under the provisions of subsection (1)(d) of this section, an application for change or transfer of the unperfected water right must be filed specifically to correct the actual or anticipated cause or causes of the public water system failure. Inadequate water rights for a public water system to serve existing hook-ups or to accommodate future population growth or other future uses do not constitute a public health or safety emergency. To be considered a failing public water system, the department of health, in consultation with the department and the local health authority, must make a determination that the system meets one or more of the following conditions:
     (a) A public water system has failed, or is in danger of failing within two years, to meet state board of health standards for the delivery of potable water to existing users in adequate quantity or quality to meet basic human drinking, cooking, and sanitation needs;
     (b) The current water source has failed or will fail so that the public water system is or will become incapable of exercising its existing water rights to meet existing needs for drinking, cooking, and sanitation purposes after all reasonable conservation efforts have been implemented; or
     (c) A change in source is required to meet drinking water quality standards and avoid unreasonable treatment costs, or the state department of health determines that the existing source of supply is unacceptable for human use.

NEW SECTION.  Sec. 17   A new section is added to chapter 90.44 RCW to read as follows:
     (1) The purpose of use of an unperfected water right for municipal, community domestic, or multiple domestic use, or a portion thereof, held by a municipal water supplier may be changed or transferred in the same manner as is provided in RCW 90.44.100, if the change or transfer:
     (a) Is subject to stream flow protection or restoration requirements related to implementing a watershed plan approved under chapter 90.82 RCW or RCW 90.54.040(1), based on the proportionate share of the water user's effects on environmental resources, including instream flows;
     (b) Is subject to stream flow protection or restoration requirements contained in an approved habitat conservation plan, federal energy regulatory commission hydropower license, or comprehensive irrigation district management plan;
     (c) Is subject to a water management environmental contract established under section 20 or 21 of this act; or
     (d) Is needed to resolve or alleviate a public health or safety emergency caused by a failing public water supply system currently providing potable water to existing users.
     (2) To qualify for a change or transfer of right under the provisions of subsection (1)(a) or (b) of this section, the public water system operated by the applicant municipal water supplier must be certified by the state department of health to be in compliance with water conservation standards specified by the department of health as those standards may be amended in the future.
     (3) To qualify for a change or transfer of right under the provisions of subsection (1)(d) of this section, an application for change or transfer of the unperfected water right must be filed specifically to correct the actual or anticipated cause or causes of the public water system failure. Inadequate water rights for a public water system to serve existing hook-ups or to accommodate future population growth or other future uses do not constitute a public health or safety emergency. To be considered a failing public water system, the department of health, in consultation with the department and the local health authority, must make a determination that the system meets one or more of the following conditions:
     (a) A public water system has failed, or is in danger of failing within two years, to meet state board of health standards for the delivery of potable water to existing users in adequate quantity or quality to meet basic human drinking, cooking, and sanitation needs;
     (b) The current water source has failed or will fail so that the public water system is or will become incapable of exercising its existing water rights to meet existing needs for drinking, cooking, and sanitation purposes after all reasonable conservation efforts have been implemented; or
     (c) A change in source is required to meet drinking water quality standards and avoid unreasonable treatment costs, or the state department of health determines that the existing source of supply is unacceptable for human use.

NEW SECTION.  Sec. 18   A new section is added to chapter 90.03 RCW to read as follows:
     (1) The department may, with the concurrence of the department of fish and wildlife, approve various forms of mitigation to offset a measurable or calculated reduction in stream flow during critical flow periods that would result from approval of an application for a water right for municipal water supply purposes or an application for change or transfer of a water right for municipal water supply purposes under the following conditions:
     (a)(i) The mitigation must be requested by the applicant municipal water supplier; and (ii) a watershed plan adopted under chapter 90.82 RCW or RCW 90.54.040(1) must be in effect for the proposed or existing water source related to the water right, and the requested mitigation must be consistent with the plan; or
     (b) The applicant must be subject to a water management environmental contract established under section 20 or 21 of this act.
     (2) The applicant must demonstrate that effective measures can be adopted to avoid or mitigate the stream flow reduction, utilizing generally accepted scientific standards to determine as nearly as possible the actual amount of stream flow reduction.
     (3) Mitigation measures prescribed by the department must be directly proportional to the impact caused by the permitted use of water or change. Elements of mitigation prescribed by the department may include but are not limited to replacement of the consumed water and other actions to preserve or maintain instream values, including nonwater measures and measures at a location other than the stream reach where the effects would occur, and may include any combination of the following in addition to any other measures deemed effective by the department:
     (a) Stream flow augmentation to replace measured or calculated loss of water as a result of a new surface or ground water permit. The water must be returned to the water body at a time and at a point that will have the required mitigating effect on stream flows;
     (b) Stream or watershed restoration, installation of vegetation or runoff controls, preservation or restoration of wetlands, ground water recharge as preservation or restoration, replacement of a water source that has a direct hydraulic connection with a surface water body with an alternative source that has a lesser or delayed effect upon the impacted water body, or any other mitigation measures or combination of measures agreed upon by the department and the applicant for a water right; or
     (c) Use of reclaimed water as a replacement for water authorized for use under an existing right or permit withdrawing water from the same water body.
     (4) Mitigation measures undertaken pursuant to issuing a water right or a water right change must include:
     (a) Provisions for assurance that mitigation measures will be maintained and effective for the duration of the water right; and
     (b) Enforcement measures through application of financial penalty, injunction, or other remedy provided by law.
     (5) Mitigation measures are subject to evaluation regarding their effectiveness on a periodic basis and should be modified as necessary by joint agreement between the department and the water right holder to maintain the prescribed standard of performance.
     (6) Mitigation measures approved under this section must not impair existing water rights.
     (7) Any mitigation prescribed by the department must be set forth in the department's report of examination for the new or changed water right. The mitigation requirements are subject to appeal to the pollution control hearings board under chapter 43.21B RCW, as part of an appeal of the report of examination.

NEW SECTION.  Sec. 19   A new section is added to chapter 90.44 RCW to read as follows:
     The provisions of section 18 of this act apply to issuance of ground water rights or approval of amendments when the right or amendment would result in a measurable or calculated reduction in the flow of a stream during a critical flow period.

NEW SECTION.  Sec. 20   A new section is added to chapter 90.03 RCW to read as follows:
     (1) The department may enter into water management environmental contracts with one or more municipal water suppliers in a watershed to meet environmental objectives established in a water resource management program adopted under RCW 90.54.040(1) or under chapter 90.82 RCW. The term of the contracts may not exceed ten years, but the contracts may be renewed or amended upon agreement of the parties.
     (2) Water management environmental contracts must be consistent with:
     (a) Growth management plans developed under chapter 36.70A RCW where these plans are adopted and in effect;
     (b) Water supply plans approved under chapter 43.20 RCW;
     (c) Coordinated water supply plans approved under chapter 70.116 RCW;
     (d) Watershed plans adopted under chapter 90.82 RCW or RCW 90.54.040(1); and
     (e) Water use efficiency and conservation requirements and standards established by the state department of health or such requirements and standards as are provided in an adopted watershed plan, whichever are the more stringent.
     (3) A water management environmental contract must:
     (a) Require the public water system operated by the participating municipal water supplier to meet the environmental obligations under the watershed plan, based on the proportionate share of the public water system's effect on environmental resources;
     (b) Establish performance measures and timelines for measures to be completed;
     (c) Provide for monitoring of stream flows and metering of water use as needed to ensure that the terms of the contract are met; and
     (d) Require annual reports from the water users regarding contract performance.
     (4) As needed to implement contract activities, the department may provide or receive funding, or both, under its existing authorities.
     (5) The department shall provide opportunity for public review of a proposed contract before it is executed. The department shall make proposed and executed contracts and annual reports available on the department's internet web site.
     (6) The department must consult with affected local governments and the state departments of health and fish and wildlife prior to executing a contract.
     (7) Prior to contract execution, the department must conduct a government-to-government consultation with affected tribal governments. The municipal water suppliers operating the public water systems that are proposing to enter the contracts must be invited to participate in the consultations. During these consultations, the department and the municipal water suppliers shall explore the potential interest of the tribal governments or governments in participating in the contract.
     (8) Any person aggrieved by the department's failure to satisfy the requirements in subsection (3) of this section as embodied in the department's decision to enter a contract under this section may, within thirty days of the execution of such a contract, appeal the department's decision to the pollution control hearings board under chapter 43.21B RCW.
     (9) Any projects implemented by a municipal water system under the terms of a contract reached under this section may be continued and maintained by the municipal water system after the contract expires or is terminated.

NEW SECTION.  Sec. 21   A new section is added to chapter 90.82 RCW to read as follows:
     (1) The departments of ecology and fish and wildlife shall solicit a minimum of two areas engaged in watershed planning under this chapter or basin or multiple watershed planning under RCW 90.54.040(1) to voluntarily pilot the water management environmental contract provisions provided in section 20 of this act prior to completion of a watershed plan. At least one pilot area must be selected from east of the Cascade mountains and at least one pilot area must be selected from west of the Cascade mountains. The pilot areas selected should be planning areas that are relatively advanced in the development and adoption of a plan. This subsection is not intended to limit the number of areas or entities eligible to participate in the pilot water management environmental contracts.
     (2) Any physical water management projects implemented under this section must first be approved by the watershed planning unit established under this chapter, using the provisions of RCW 90.82.130(1)(a); or by the departments of ecology and fish and wildlife in the case of an areas planning under RCW 90.54.040(1).
     (3) Before December 31, 2003, and December 31, 2004, the department shall report to the appropriate committees of the legislature the results of the implementation pilots provided for in subsection (1) of this section. Based on the experience of the pilot areas, the department shall offer any suggested changes in law that would improve, facilitate, and maximize the implementation of watershed plans adopted under this chapter.

NEW SECTION.  Sec. 22   A new section is added to chapter 90.82 RCW to read as follows:
     The department may not enter into new water management environmental contracts under section 20 or 21 of this act after July 1, 2008. This section does not apply to the renewal of contracts in effect prior to that date.

NEW SECTION.  Sec. 23   A new section is added to chapter 90.03 RCW to read as follows:
     The department shall give priority to processing new water right applications under RCW 90.03.290, reservoir permits under RCW 90.03.370, and applications for changes and transfers under RCW 90.03.380 through 90.03.397, whenever necessary to provide for timely and effective implementation of a watershed plan adopted under chapter 90.82 RCW or RCW 90.54.040(1) or a water management environmental contract authorized under section 20 or 21 of this act. This section applies only to the sequence of application processing and does not affect the relative priority date of any resulting water rights.

NEW SECTION.  Sec. 24   A new section is added to chapter 90.03 RCW to read as follows:
     The department shall give priority to processing new water right applications under RCW 90.44.050, and applications for changes and transfers under RCW 90.44.100 and 90.44.105, whenever necessary to provide for timely and effective implementation of a watershed plan adopted under chapter 90.82 RCW or RCW 90.54.040(1) or a water management environmental contract authorized under section 20 or 21 of this act. This section applies only to the sequence of application processing and does not affect the relative priority date of any resulting water rights.

NEW SECTION.  Sec. 25   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.