BILL REQ. #:  Z-0528.2 

Read first time 01/27/09.   Referred to Committee on Environment, Water & Energy.

     AN ACT Relating to improving the effectiveness of water bank authorization and exchange provisions; amending RCW 90.42.100, 39.34.200, 90.42.080, 90.03.255, and 90.44.055; adding new sections to chapter 90.42 RCW; adding a new section to chapter 90.03 RCW; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that many watershed groups and programs, including but not limited to many watershed planning units operating under chapter 90.82 RCW, have proposed or considered the establishment of water banks to meet vital instream and out-of-stream needs within a watershed or region. The legislature also finds that water banks and exchanges can: Provide critical tools to make water supplies available when and where needed during times of drought; improve stream flows and preserve instream values during fish critical periods; reduce water transaction costs, time, and risk to purchasers; facilitate fair and efficient reallocation of water from one beneficial use to another; provide banked water supplies to offset impacts related to future development and the issuance of new water rights; and facilitate water agreements that protect upstream community values while retaining flexibility to meet critical downstream water needs in times of scarcity. The legislature therefore declares that the intent of this act is to provide clear authority for water banks throughout the state, to improve the effectiveness of water bank and exchange provisions, and to use the interlocal cooperation act to establish watershed management partnerships for water banking purposes.

Sec. 2   RCW 90.42.100 and 2003 c 144 s 2 are each amended to read as follows:
     (1) The department is hereby authorized to use the trust water rights program ((in the Yakima river basin)) for water banking purposes statewide.
     (2) Public agencies, as defined under RCW 39.34.020, are authorized to enter into interlocal agreements with the department to form watershed management partnerships under the interlocal cooperation act, chapter 39.34 RCW, for the purpose of establishing and operating local water banks under the state trust water rights program. The department shall invite any federally recognized Indian tribe with a reservation located within the area proposed to be covered by the water bank to be a party to the interlocal agreement. The geographic area served by a water bank established under this subsection must be contiguous except that the water bank may not operate within the reservation boundaries of a federally recognized Indian tribe, or within lands held in trust by the federal government on behalf of a federally recognized Indian tribe, without written consent from the tribe.
     (3) Water banking may be used for one or more of the following purposes:
     (a) To authorize the use of trust water rights to mitigate for water resource impacts, future water supply needs, or any beneficial use under chapter 90.03, 90.44, or 90.54 RCW, consistent with any terms and conditions established by the transferor, except that within the Yakima river basin return flows from water rights authorized in whole or in part for any purpose shall remain available as part of the Yakima basin's total water supply available and to satisfy existing rights for other downstream uses and users;
     (b) To document transfers of water rights to and from the trust water rights program; and
     (c) To provide a source of water rights the department can make available to third parties on a temporary or permanent basis for any beneficial use under chapter 90.03, 90.44, or 90.54 RCW.
     (((3))) (4) The department shall not use or agree to the use of water banking to:
     (a) Cause detriment or injury to existing rights;
     (b) Issue temporary water rights or portions thereof for new potable uses requiring an adequate and reliable water supply under RCW 19.27.097;
     (c) Administer federal project water rights, including federal storage rights; or
     (d) Allow carryover of stored water in the Yakima basin from one water year to another water year if it would negatively impact the total water supply available.
     (((4))) (5) Nothing in this section may be interpreted or administered in a manner that precludes the use of the department's existing authority to process trust water rights applications under this chapter or to process water right applications under chapter 90.03 or 90.44 RCW. The interlocal agreement process to establish a watershed management partnership under subsection (2) of this section is not required for water banks or exchanges operating under existing authority as of the effective date of this section.
     (6) For purposes of this section and RCW 90.42.135, "total water supply available" shall be defined as provided in the 1945 consent decree between the United States and water users in the Yakima river basin, and consistent with later interpretation by state and federal courts.
     (7) In operating a water bank, a watershed management partnership may acquire, purchase, hold, lease, manage, occupy, and sell real and personal property or any interest therein, enter into and perform all necessary contracts, appoint and employ necessary agents and employees and fix their compensation, employ contractors including contracts for professional services, sue and be sued, and do all lawful acts required and expedient to carry out the purposes of this chapter.
     (8) A watershed management partnership operating a water bank may establish a revolving fund for the purpose of acquiring and disbursing water rights.

Sec. 3   RCW 39.34.200 and 2003 c 327 s 4 are each amended to read as follows:
     (1) Any two or more public agencies may enter into agreements with one another to form a watershed management partnership for the purpose of implementing any portion or all elements of a watershed management plan, including the coordination and oversight of plan implementation. The plan may be any plan or plan element described in RCW 39.34.190(3).
     (2) Public agencies may enter into agreements with the department of ecology to form watershed management partnerships for the purpose of establishing and operating local water banks under the state trust water rights program, chapter 90.42 RCW.
     (3) The watershed partnership agreement shall include the provisions required of all interlocal agreements under RCW 39.34.030(3). The agreement shall be filed pursuant to RCW 39.34.040 with the county auditor of each county lying within the geographical watershed area to be addressed by the partnership. The public agencies forming the partnership shall designate a treasurer for the deposit, accounting, and handling of the funds of the partnership. The treasurer shall be either a county treasurer or a city treasurer of a county or city participating in the agreement to form the partnership.

NEW SECTION.  Sec. 4   A new section is added to chapter 90.42 RCW to read as follows:
     Costs incurred by the department or a water bank established under RCW 90.42.100 associated with water service contracts with federal agencies may be recovered by the department from persons withdrawing water or credits from the water bank or the water bank as a condition of the exercise of a water right supplied from a federal water project.

Sec. 5   RCW 90.42.080 and 2002 c 329 s 9 are each amended to read as follows:
     (1)(a) The state may acquire all or portions of existing ((water)) surface or groundwater rights, by purchase, gift, or other appropriate means other than by condemnation, from any person or entity or combination of persons or entities. Once acquired, such rights are trust water rights. A water right acquired by the state that is expressly conditioned to limit its use to instream purposes shall be administered as a trust water right in compliance with that condition.
     (b) If the holder of a right to surface water ((from a body of water)) or groundwater chooses to donate all or a portion of the person's water right to the trust water system to assist in providing instream flows or to preserve surface or groundwater resources on a temporary or permanent basis, the department shall accept the donation on such terms as the person may prescribe as long as the donation satisfies the requirements of subsection (4) of this section and the other applicable requirements of this chapter and the terms prescribed are relevant and material to protecting any interest in the water right retained by the donor. Once accepted, such rights are trust water rights within the conditions prescribed by the donor.
     (2) The department may enter into leases, contracts, or such other arrangements with other persons or entities as appropriate, to ensure that trust water rights acquired in accordance with this chapter may be exercised to the fullest possible extent.
     (3) Trust water rights may be acquired by the state on a temporary or permanent basis.
     (4) Except as provided in subsection (10) of this section, a water right donated under subsection (1)(b) of this section shall not exceed the extent to which the water right was exercised during the five years before the donation nor may the total of any portion of the water right remaining with the donor plus the donated portion of the water right exceed the extent to which the water right was exercised during the five years before the donation. A water right holder who believes his or her water right has been impaired by a trust water right donated under subsection (1)(b) of this section may request that the department review the impairment claim. If the department determines that exercising the trust water right resulting from the donation or exercising a portion of that trust water right donated under subsection (1)(b) of this section is impairing existing water rights in violation of RCW 90.42.070, the trust water right shall be altered by the department to eliminate the impairment. Any decision of the department to alter or not to alter a trust water right donated under subsection (1)(b) of this section is appealable to the pollution control hearings board under RCW 43.21B.230. A donated water right's status as a trust water right under this subsection is not evidence of the validity or quantity of the water right.
     (5) The provisions of RCW 90.03.380 and 90.03.390 do not apply to donations for instream flows described in subsection (1)(b) of this section, but do apply to other transfers of water rights under this section.
     (6) No funds may be expended for the purchase of water rights by the state pursuant to this section unless specifically appropriated for this purpose by the legislature.
     (7) Any water right conveyed to the trust water right system as a gift that is expressly conditioned to limit its use to instream purposes shall be managed by the department for public purposes to ensure that it qualifies as a gift that is deductible for federal income taxation purposes for the person or entity conveying the water right.
     (8) Except as provided in subsection (10) of this section, if the department acquires a trust water right by lease, the amount of the trust water right shall not exceed the extent to which the water right was exercised during the five years before the acquisition was made nor may the total of any portion of the water right remaining with the original water right holder plus the portion of the water right leased by the department exceed the extent to which the water right was exercised during the five years before the acquisition. A water right holder who believes his or her water right has been impaired by a trust water right leased under this subsection may request that the department review the impairment claim. If the department determines that exercising the trust water right resulting from the leasing or exercising of a portion of that trust water right leased under this subsection is impairing existing water rights in violation of RCW 90.42.070, the trust water right shall be altered by the department to eliminate the impairment. Any decision of the department to alter or not to alter a trust water right leased under this subsection is appealable to the pollution control hearings board under RCW 43.21B.230. The department's leasing of a trust water right under this subsection is not evidence of the validity or quantity of the water right.
     (9) For a water right donated to or acquired by the trust water rights program on a temporary basis, the full quantity of water diverted or withdrawn to exercise the right before the donation or acquisition shall be placed in the trust water rights program and shall revert to the donor or person from whom it was acquired when the trust period ends.
     (10) For water rights donated or leased under subsection (4) or (8) of this section where nonuse of the water right is excused for sufficient cause under RCW 90.14.140, and where the nonuse occurred in the five years preceding the donation or lease, the department shall calculate the amount of water to be acquired by looking at the extent to which the right was exercised during the most recent five-year period preceding the date where sufficient cause for nonuse under RCW 90.14.140 was established.

NEW SECTION.  Sec. 6   A new section is added to chapter 90.42 RCW to read as follows:
     The department may adopt rules as necessary to implement this chapter.

Sec. 7   RCW 90.03.255 and 1997 c 360 s 2 are each amended to read as follows:
     The department shall, when evaluating an application for a water right, transfer, or change filed pursuant to RCW 90.03.250 or 90.03.380 that includes provision for any water impoundment or other resource management technique, take into consideration the benefits and costs, including environmental effects, of any water impoundment or other resource management technique that is included as a component of the application. The department's consideration shall extend to any increased water supply that results from the impoundment or other resource management technique, including but not limited to any recharge of groundwater that may occur, as a means of making water available or otherwise offsetting the impact of the diversion of surface water proposed in the application for the water right, transfer, or change. Except when used as a condition for approving applications that identify use of trust water rights held in water banks for mitigation purposes, provision for an impoundment or other resource management technique in an application shall be made solely at the discretion of the applicant and shall not otherwise be made by the department as a condition for approving an application that does not include such provision.
     This section does not lessen, enlarge, or modify the rights of any riparian owner, or any existing water right acquired by appropriation or otherwise.

Sec. 8   RCW 90.44.055 and 1997 c 360 s 3 are each amended to read as follows:
     The department shall, when evaluating an application for a water right or an amendment filed pursuant to RCW 90.44.050 or 90.44.100 that includes provision for any water impoundment or other resource management technique, take into consideration the benefits and costs, including environmental effects, of any water impoundment or other resource management technique that is included as a component of the application. The department's consideration shall extend to any increased water supply that results from the impoundment or other resource management technique, including but not limited to any recharge of groundwater that may occur, as a means of making water available or otherwise offsetting the impact of the withdrawal of groundwater proposed in the application for the water right or amendment in the same water resource inventory area. Except when used as a condition for approving applications that identify use of trust water rights held in water banks for mitigation purposes, provision for an impoundment or other resource management technique in an application shall be made solely at the discretion of the applicant and shall not be made by the department as a condition for approving an application that does not include such provision.
     This section does not lessen, enlarge, or modify the rights of any riparian owner, or any existing water right acquired by appropriation or otherwise.

NEW SECTION.  Sec. 9   A new section is added to chapter 90.03 RCW to read as follows:
     For purposes of calculating annual consumptive quantity as defined under RCW 90.03.380(1), if, within the most recent five-year period, the water right has been in the trust water rights program under chapter 90.38 or 90.42 RCW, or the water right has been in a water bank under RCW 90.42.100, or partial nonuse of the water right is excused from relinquishment under RCW 90.14.140, the department shall look to the most recent five-year period of continuous beneficial use preceding one of these three events.

NEW SECTION.  Sec. 10   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.