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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
environment; 2025-2026
Purpose
Makes statutory and session law changes relating to the environment necessary to implement the FY 2026 state budget.
Background
The Arizona Constitution prohibits substantive law from being included in the general appropriations, capital outlay appropriations and supplemental appropriations bills. However, it is often necessary to make statutory and session law changes to effectuate the budget. Thus, separate bills called budget reconciliation bills (BRBs) are introduced to enact these provisions. Because BRBs contain substantive law changes, the Arizona Constitution provides that they become effective on the general effective date, unless an emergency clause is enacted.
H.B. 2952 contains the budget reconciliation provisions for changes relating to the environment.
Provisions
Agriculture and Innovation Fund Pilot Program (Pilot Program)
1. Establishes the Pilot Program to provide grants and collect data for water-focused innovation in agriculture.
2. Requires the Arizona Department of Agriculture (AZDA) to administer the Pilot Program.
3. Establishes the Agriculture and Water Innovation Fund consisting of legislative appropriations, grants from federal agencies and monies appropriated by any other lawful source.
4. Specifies that monies in the Agriculture and Water Innovation Fund are continuously appropriated and exempt from lapsing.
5. Requires the AZDA to administer the Agriculture and Water Innovation Fund.
6. Prohibits the AZDA from using more than three percent of the monies in the Agriculture and Water Innovation Fund annually for the costs of administering the Agriculture and Water Innovation Fund and the Pilot Program.
7. Allows the AZDA to grant monies from the Agriculture and Water Innovation Fund to qualified applicants to acquire or contract for implementing innovative technology that improves water use efficiency by improving soil health subject to the following conditions:
a) the grant may not exceed $2,000,000 for a single qualified applicant or for qualified applicants from the same farm unit or $5,000,000 if the qualified applicant is an irrigation district that will implement innovative technology pursuant to the Pilot Program on three or more farm units within the irrigation district;
b) the innovative technology is currently implemented throughout Arizona and has demonstrated consistent improvement in indicators of water use efficiency on fields implementing the technology;
c) the increase in water use efficiency proposed is a function of improved soil health due to implementing the innovative technology;
d) the qualified applicant provides a record of active farming or intentional water conservation for three of the previous five years for the proposed acreage at the time of the application; and
e) the proposed acreage proposed to receive the innovative technology is located completely within Arizona.
8. Deems that a demonstration of increased water use efficiency may include third-party validated commercial implementation of the innovative technology and does not require academic analysis.
9. Allows the AZDA, in assessing an application, to give preference to implementing an innovative technology that the AZDA determines:
a) increases agricultural yields on fields that increase water use efficiency;
b) improves water use efficiency on high-water-demand crops or high-value crops;
c) maximizes benefits to soil health including reduced need for cover cropping, reduction in soil salinity and improved disease resilience; and
d) provides opportunities for data collection and public demonstration of the technology for diverse high agricultural water use regions in Arizona.
10. Prohibits recipients of grant monies from receiving a state tax credit for the portion of an innovative technology that is purchased with grant monies.
11. Allows the Director of the AZDA to prepay the grantee for implementing the innovative technology if the contracted-for innovative technology service provider agrees in the contract to provide recourse to Arizona in the event of nonperformance.
12. Requires the AZDA, as a condition of the grant, to require the qualified applicant to:
a) certify the installation of the new innovative technology;
b) agree to use the new innovative technology for not less than three years; and
c) report on the individual fields that receive the benefit of the grant monies to demonstrate increased water use efficiency on the affected fields.
13. Allows water savings, for a qualified applicant that uses mainstream Colorado River water or water delivered through the Central Arizona Project (CAP) for agricultural irrigation that is impacted by the Pilot Program, to be used to farm fallowed irrigated acreage or be dedicated to system conservation as approved by the Director of the Arizona Department of Water Resources (ADWR).
14. Requires the AZDA, by December 31 of each year, to submit a written report to the President of the Senate and the Speaker of the House of Representatives and provide a copy to the Secretary of State describing the activity of the AZDA for the preceding fiscal year related to the Agriculture and Water Innovation Fund.
15. Requires the outlined report to include an accounting of expenditures from the Agriculture and Water Innovation Fund and how the monies were used to improve water efficiency and soil health.
16. Requires the outlined report to identify at least:
a) the specific fields where implementation of the innovative technology occurred;
b) the legal character of the water used on those fields;
c) the soil type and types of crops produced;
d) the improvement in water use efficiency resulting from implementing the innovative soil health technology and, if known, the amount of water conserved;
e) cobenefits arising from implementing the innovative soil health technology, including yield increases, crop quality improvements and nutrient use efficiencies; and
f) any other relevant data to better inform future decisions on strategically implementing agriculture and water innovation technologies or programs to use agricultural water more efficiently in Arizona.
17. Defines farm unit as one or more farms that are irrigated with groundwater, surface water, mainstream Colorado River water or water delivered through the CAP and that are contiguous or in proximity to each other with similar soil conditions.
18. Defines innovative technology as products or services that improve water use efficiency by improving soil health in agriculture without requiring nonnative soil amendments or improvements to irrigation infrastructure.
19. Defines qualified applicant as either:
a) an agricultural landowner, beneficial owner of trust land or lessee of agricultural land that has actively farmed the land or committed the land to intentional water conservation in three of the five calendar years immediately preceding the date of the application; or
b) an irrigation district that applies for the benefit of members of the irrigation district.
20. Repeals the Pilot Program and the Agriculture and Water Innovation Fund on January 1, 2029.
Arizona State Land Department (ASLD)
21. Requires the Arizona State Land Commissioner (Commissioner) to contract with qualified third parties as selected by the Commissioner to review any application submitted to the ASLD.
22. Requires a third-party reviewer that reviews an application to:
a) review the application and perform all other related actions consistent with the prescribed requirements applicable to the ASLD; and
b) notify the ASLD and the applicants of the results of the review.
23. Requires the Arizona State Parks Board, by October 1, 2025, to apply to the ASLD to purchase state lands for the Arizona Veterans Memorial State Park.
24. Requires the Commissioner, on receipt of a valid application to purchase state lands from the Arizona State Parks Board, to schedule and hold an auction for such state lands.
ADWR
25. Extends the statutorily prescribed moratorium on levying and collecting an annual groundwater withdrawal fee for Arizona water banking purposes in the Pinal AMA from January 1, 2027, to January 1, 2028.
26. Extends, from January 1, 2027, to January 1, 2028, the $2.50 per acre-foot per year cap on the annual groundwater withdrawal fee for groundwater and irrigation efficiency projects in the Pinal AMA.
27. Continues to authorize the Arizona Water Protection Fund Commission to grant up to $336,000 of unobligated monies in the Arizona Water Protection Fund in FY 2026 to ADWR to pay for AWDR’s FY 2026 administrative costs.
Arizona Department of Environmental Quality (ADEQ)
28. Continues to authorize ADEQ to use up to $6,531,000 from the Underground Storage Tank Revolving Fund in FY 2026 for administrative costs and remediating sewage discharge issues in Naco, Arizona and other border areas of Arizona.
29. Requires the Director of ADEQ, in FY 2026, to reduce fees for tests conducted in area A so that vehicle emissions testing fee revenues collected from area A are reduced by five percent of the FY 2024 area A collections.
30. Exempts ADEQ from the rulemaking requirements relating to administrative procedure until July 1, 2026, for the purpose of establishing vehicle emissions testing fees.
Fire Incident Management Fund (FIMF)
31. Extends the delayed repeal of the FIMF from July 1, 2025, to July 1, 2027.
Nuclear Emergency Management Fund
32. Amends Laws 2025, Chapter 56 to increase the prescribed appropriations from the Nuclear Emergency Management Fund and the assessments on outlined entities from $2,617,991 to $2,667,991 in FY 2026 and from $2,711,339 to $2,761,339 in FY 2027.
Arizona Water Banking Fund
33. Continues to include legal fees as an authorized use of Arizona Water Banking Fund monies appropriated to the Arizona Navigable Stream Adjudication Commission in FY 2026.
Water Quality Assurance Revolving Fund
34. Prohibits the appropriation from the state General Fund to the Water Quality Assurance Revolving Fund from exceeding $15,000,000.
Agricultural Fees
35. Allows, for FY 2026, the Director of the AZDA, subject to the review of the AZDA Advisory Council, to lower existing fees for any funds held in trust by the AZDA.
36. Requires the AZDA to adopt emergency rules, through July 1, 2026, and in conjunction with the industry, to modify fees deposited in the Dangerous Plants, Pests and Diseases Trust Fund.
Miscellaneous
37. Defines Area a.
38. Becomes effective on the general effective date.
House Action
APPROP 6/12/25 DP 11-7-0-0
3rd Read 6/13/25 31-29-0
Prepared by Senate Research
June 25, 2025
SB/ci