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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
groundwater sales; online exchange.
Purpose
Directs the Arizona Department of Water Resources (ADWR) to establish the water marketplace and allows a person with a grandfathered right to groundwater in the Phoenix, Tucson or Pinal active management area (AMA) to sell, lease or otherwise convey any portion of the right to pump groundwater or the groundwater itself to any other person in the Phoenix, Tucson or Pinal AMA.
Background
Groundwater which is withdrawn pursuant to a grandfathered right or a groundwater withdrawal permit or from an exempt well may be transported without payment of damages within a sub-basin of an active management area, subject to outlined limitations on locations of use. Groundwater which is withdrawn by a city, town or private water company within its service area may be transported without payment of damages within its service area within a sub-basin of an AMA (A.R.S. § 45-541).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows a person with a grandfathered right to groundwater in the Phoenix, Tucson or Pinal AMA to sell, lease or otherwise convey any portion of the right to pump groundwater or the groundwater itself to any other person in the Phoenix, Tucson or Pinal AMA.
2. States the water marketplace does not authorize a person to sell, lease or otherwise convey the right to pump groundwater or groundwater itself in one subbasin for use or withdrawal in another subbasin but groundwater may be transported between subbasins by other means.
3. Requires any groundwater withdrawn to be withdrawn at either:
a) the same location authorized in the original grandfathered right; or
b) any other location in the same subbasin if the proposed location of withdrawal complies with adopted rules.
4. Requires a person who sells, leases or otherwise conveys the right to pump groundwater or groundwater itself as prescribed to notify ADWR of the following with respect to the transaction:
a) if the transaction is a sale, the name and address of the buyer;
b) if the transaction is for a lease, the name and address of the lessor and lessee;
c) if the transaction is a lease or sale;
d) if for a lease, the duration of the lease;
e) if known, if the transaction is for the right to pump groundwater or the right to groundwater itself;
f) if known and if the transaction is only for a sale of the right to pump groundwater, the anticipated point of reduction and withdrawal;
g) if known, the anticipated method of conveyance or transport;
h) the amount of groundwater to be forgone by the seller or lessor;
i) the amount of groundwater to be received or withdrawn by the buyer or lessee;
j) the amount of any transaction costs incurred from the transaction;
k) the price per acre-foot to be paid for any groundwater received or withdrawn by the buyer or lessee; and
l) any other relevant information prescribed by ADWR.
5. Allows ADWR to prescribe the form for the notice required.
6. Allows the parties to an authorized transaction to update the information provided to ADWR at any time.
7. Requires the buyer or lessee, for any prescribed sale, lease or conveyance, to receive the right to receive or withdraw 65 percent of the total amount of groundwater forgone by a seller or lessor resulting from the transaction.
8. Prohibits the original grandfathered right conveyed to a seller, for any authorized sale, to be pumped, otherwise used or further conveyed.
9. Prohibits the original grandfathered right conveyed to a lessee, for any authorized lease, to be pumped, otherwise used or further conveyed during the duration of the lease.
10. Requires ADWR, in calculating the amount of groundwater itself or right to pump groundwater that a seller or lessor may forgo, to use the average amount of water pumped pursuant to the grandfathered right over the preceding five years.
11. Requires any groundwater or right to groundwater itself conveyed and the use of such groundwater to be:
a) exempt from any replenishment obligation on the part of the buyer or lessee, including a replenishment tax;
b) excluded from a city's or town's groundwater use for the purposes of determining the city's or town's groundwater allowance;
c) deemed consistent with the management goal for the AMA; and
d) for the purpose of obtaining a certificate of assured water supply, deemed physically available to the buyer or to the lessee for the duration of the lease.
12. Allows groundwater that is received or withdrawn to be applied toward obtaining a certificate of assured water supply.
13. Requires groundwater that is forgone by a seller as prescribed to be treated by ADWR as follows:
a) 50 percent must be allocated to the common aquifer and treated as inflow for the purposes of any water modeling completed by ADWR;
b) 50 percent must be treated as inflow for the purposes of any water modeling completed by ADWR, separately accounted for and reserved for the exclusive benefit of an application for a certificate of assured water supply; and
c) for the purposes of any water or potential water use for the seller, all groundwater must be deemed permanently retired, relinquished or extinguished for the purposes of the seller.
14. Requires groundwater that is forgone by a lessor as prescribed to:
a) be excluded from any water modeling used to evaluate an application for a certificate or designation of assured water supply, unless the lease is for a period of 100 years or longer in which case 50 percent must be treated as inflow for the purposes of any water modeling completed by ADWR, separately account for and reserved for the exclusive benefit of an application for a certificate of assured water supply; and
b) revert back to the lessor at the end of the lease term.
15. States the water marketplace does not apply to water in the subflow zone of a river or stream or water in the cone of depression of a well that may be pumping surface water and must not be construed to modify existing law in any way with respect to determining which water is surface water and which is groundwater.
16. States the water marketplace does not authorize ADWR or any political subdivision of Arizona to:
a) curtail the scope of existing grandfathered rights unless the rights are sold, leased or otherwise conveyed; or
b) impose additional requirements or restrictions on the use or exercise of type 2 non-irrigation grandfathered rights.
17. Requires a seller or leaser that sells, leases or otherwise conveys the right to pump groundwater or groundwater itself pursuant to the water marketplace to disclose any transaction costs related to the sale, lease or conveyance in the contract for any such sale, lease or conveyance.
18. Requires ADWR to establish, maintain and host on its website an online water exchange for groundwater and groundwater rights that are transferred, sold, leased or otherwise conveyed as prescribed.
19. Requires the online water exchange to be publicly accessible and to include for each transaction the information submitted in the prescribed notices.
20. Makes conforming changes.
21. Becomes effective on the general effective date.
Prepared by Senate Research
February 13, 2024
RA/slp