SB1335 - 572R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 45-465.05, Arizona Revised Statutes, is amended to read:

START_STATUTE45-465.05. Permanent relinquishment of irrigation grandfathered rights; groundwater savings credits; assured water supply; rules; report; definitions

A. A person that owns land within the Phoenix or Pinal active management area that may be legally irrigated with groundwater pursuant to an irrigation grandfathered right may apply to the director to permanently relinquish all of the irrigation grandfathered right in exchange for groundwater savings credits. The director shall approve the application if all of the following conditions apply:

1. The person's use of the irrigation grandfathered right complies with this chapter and the applicable management plan.

2. For each irrigation grandfathered right that is relinquished, the director determines that land to which the irrigation grandfathered right is appurtenant has been legally irrigated with groundwater in at least three of the preceding five years.

3. The person has filed all reports required pursuant to section 45-632 for the last five years.

4. The person does not maintain a negative balance in the person's flexibility account established pursuant to section 45-467.

5. The department has not issued a certificate of assured water supply for the acres associated with the relinquishment.

B. The director shall quantify groundwater savings credits. When quantifying groundwater savings credits, the following apply:

1. The amount of groundwater savings credit credits shall be determined in acre-feet by multiplying the acres associated with the relinquishment by the following conversion multiplier:

(a) In the Phoenix active management area, one hundred fifty.

(b) In the Pinal active management area, one hundred.

2. A person may not receive groundwater savings credits for a volume of water that exceeds sixty times the mean amount of groundwater used annually pursuant to the irrigation grandfathered right in the three years with the highest use during the five years preceding an application to permanently relinquish the irrigation grandfathered right. If a person applies to relinquish an irrigation grandfathered right after conveyance of an irrigation grandfathered right, the mean amount of groundwater used annually shall be determined using a proportionate share of the total amount of groundwater used annually pursuant to any irrigation grandfathered rights appurtenant to the land included in the irrigation grandfathered right that the person has applied to relinquish in the years used to satisfy the requirements of subsection A, paragraph 2 of this section.

C. When issuing groundwater savings credits, the director shall:

1. Identify all of the following:

(a) The amount of groundwater savings credits as calculated pursuant to subsection B of this section.

(b) The number and location of the acres associated with the relinquishment.

(d) The owner of the acres associated with the relinquishment at the time of the relinquishment that holds the groundwater savings credits.

2. Determine whether the criteria prescribed in subsection D, paragraph 3 or subsection E, paragraph 3 of this section would be satisfied. This determination shall be applied apply to both of the following:

(a) An assured water supply application that is submitted to the department within two years after the date the groundwater savings credits are issued, and the determination shall remain valid until the director makes a final decision on the assured water supply application.

(b) a notice of intent to pledge groundwater savings credits to a designation of assured water supply that a person submits pursuant to subsection g, paragraph 2 of this section within two years after the date the groundwater savings credits are issued, and the determination shall remain valid until the director makes a final decision on the application to modify a designation of assured water supply.

D. For the purposes of a designation or modification of a designation of assured water supply, the volume of groundwater withdrawn or stored water recovered outside the area of impact of storage associated with groundwater savings credits calculated pursuant to subsection B of this section is exempt from the requirement to demonstrate that the groundwater is physically available in accordance with section 45-576 if all of the following apply:

1. The acres associated with the relinquishment and the location of the proposed use associated with the groundwater savings credits are or will be within the service area of a municipal provider that is designated as having an assured water supply or that has applied for a designation of assured water supply.

2. The applicant proposes to withdraw groundwater or stored water recovered outside of the area of impact of storage associated with the groundwater savings credits from one or more of the following locations:

(a) Any well that was used to serve land to which the irrigation grandfathered right is appurtenant.

(b) Any well that is located within one mile of any well that was used to serve land to which the irrigation grandfathered right is appurtenant.

(d) Any well that is located within one mile of the acres associated with the relinquishment.

3. The applicant demonstrates that groundwater or stored water recovered outside the area of impact of storage can be withdrawn to serve the proposed use for one hundred years without exceeding the depth of the aquifer or the applicable depth-to-static water level limit of the active management area, whichever is less. For the purposes of this demonstration:

(a) The director may not consider other withdrawals that exceed the depth of the aquifer or the applicable depth-to-static water level limit during the one hundred-year period as follows:

(i) In the Phoenix active management area, the depth-to-static water level limit is one thousand feet below land surface.

(ii) In the Pinal active management area, the depth-to-static water level limit is one thousand one hundred feet below land surface.

(b) For withdrawals located within one mile of any well that was used to serve land to which the irrigation grandfathered right is appurtenant, the applicant may rely on the director's determination pursuant to subsection C of this section, if applicable, or on the director's most recent assured water supply projection to satisfy this requirement. This subdivision shall does not apply if more than forty percent of the water used during the period used in the director's most recent assured water supply projection by land to which the irrigation grandfathered right is appurtenant was in lieu water as defined in section 45-802.01.

(c) Except as provided by subdivision (b) of this paragraph, the applicant must update the director's most recent assured water supply projection only to make reasonable modifications to the locations or rates of the withdrawals to reflect the changes that result from the proposed use.

4. The applicant submits evidence to the department that the water used pursuant to the groundwater savings program established under this section will not be used on any of the following:

(a) Turf that is not located in a recreational use area or other space that is regularly used for stormwater management or for civic, community or other recreational purposes, including playgrounds, sports fields, cemeteries or schoolyards.

(b) Water parks.

(c) Decorative water features, including lakes, ponds or lagoons, except as provided in section 45-132, subsection B, paragraph 4, subdivision (a).

E. For the purposes of an application for a certificate of assured water supply that proposes to rely on groundwater savings credits, the volume of groundwater or stored water recovered outside the area of impact of storage associated with the amount of groundwater savings credits calculated pursuant to subsection B of this section is exempt from the requirement to demonstrate that the groundwater or stored water recovered outside the area of impact of storage is physically available in accordance with section 45-576 if all of the following apply:

1. The proposed use associated with the groundwater savings credits is on the acres associated with the relinquishment or on land that is located within one mile of the exterior boundary of the acres associated with the relinquishment.

2. The applicant proposes to withdraw groundwater or stored water recovered outside the area of impact of storage associated with the groundwater savings credits from one or more of the following locations:

(a) Any well that was used to serve land to which the irrigation grandfathered right is appurtenant.

(b) Any well that is located within one mile of any well that was used to serve land to which the irrigation grandfathered right is appurtenant.

(d) Any well that is located within one mile of the acres associated with the relinquishment.

3. The applicant demonstrates that groundwater or stored water recovered outside of the area of impact of storage can be withdrawn to serve the proposed use for one hundred years without exceeding the depth of the aquifer or the applicable depth-to-static water level limit of the active management area, whichever is less. For the purposes of this demonstration:

(a) The director may not consider other withdrawals that exceed the depth of the aquifer or the applicable depth-to-static water level limit during the one hundred-year period as follows:

(i) In the Phoenix active management area, the depth-to-static water level limit is one thousand feet below land surface.

(ii) In the Pinal active management area, the depth-to-static water level limit is one thousand one hundred feet below land surface.

(b) For withdrawals located within one mile of any well that was used to serve the irrigation grandfathered right, the applicant may rely on the director's determination pursuant to subsection C of this section, if applicable, or on the director's most recent assured water supply projection to satisfy this requirement. This subdivision shall does not apply if more than forty percent of the water used by the irrigation grandfathered right during the period used in the director's most recent assured water supply projection was in lieu water as defined in section 45-802.01.

4. The applicant submits evidence to the department that the water used pursuant to the groundwater savings program established under this section will not be used on any of the following:

(b) Water parks.

(c) Decorative water features, including lakes, ponds or lagoons, except as provided in section 45-132, subsection B, paragraph 4, subdivision (a).

F. An applicant that submits an application for a certificate of assured water supply on or before December 31, 2030 may rely on groundwater savings credits pledged to the certificate that is issued based on that application. An applicant may not pledge groundwater savings credits to an application for a certificate of assured water supply that is submitted on or after January 1, 2031.

G. The director shall adopt rules on or before June 30, 2026 through expedited rulemaking to:

1. Set licensing time frames to issue groundwater savings credits.

2. Develop a summary process to apply pledge groundwater savings credits to designations of assured water supply.

H. Before the director issues groundwater savings credits, the director shall both:

1. Notify the holder of the irrigation grandfathered right in writing of the department's preliminary recommendations regarding the items described in subsection C of this section.

2. Request written confirmation that the holder of the irrigation grandfathered right would like to proceed with relinquishment. On receipt of confirmation that the applicant would like to relinquish the irrigation grandfathered right, the director shall issue groundwater savings credits pursuant to subsection C of this section. The holder of the groundwater savings credits may only continue to irrigate the land consistent with a temporary permit to irrigate with groundwater that the director issues pursuant to subsection O of this section.

I. A person that holds groundwater savings credits may assign the person's credits to the subsequent owner of the acres associated with the relinquishment. A person that holds groundwater savings credits may pledge the credits to an assured water supply application that proposes to rely on the credits pursuant to subsection D or E of this section.

J. After the director issues a certificate of assured water supply based on groundwater savings credits, if a municipal provider that serves acres associated with the relinquishment becomes a designated provider or if the service area of a designated provider is extended to include the subdivision for which a certificate of assured water supply was issued, the remaining groundwater savings credits associated with the certificate shall be used to support the designation.

K. On acres associated with the relinquishment and areas within one mile of the acres associated with the relinquishment that use groundwater pursuant to subsection E of this section, the following prohibitions apply:

1. A municipal provider or association as defined in section 33-1802 may not use the groundwater or stored water recovered outside the area of impact of storage for any of the following:

(a) Application to turf that is not located in a recreational use area or other space that is regularly used for stormwater management or for civic, community or recreational purposes, including playgrounds, sports fields, cemeteries or schoolyards.

(b) Water parks.

(c) Decorative water features, including lakes, ponds or lagoons, except as provided in section 45-132, subsection B, paragraph 4, subdivision (a).

2. An association as defined in section 33-1802 may not adopt or enforce any either of the following:

(a) Minimum turf requirements for turf that is not located in a recreational use area or other space that is regularly used for stormwater management or for civic, community or recreational purposes, including playgrounds, sports fields, cemeteries or schoolyards.

(b) Requirements for the installation, filling or refilling of:

(i) Water parks.

(ii) Decorative water features, including lakes, ponds or lagoons, except as provided in section 45-132, subsection B, paragraph 4, subdivision (a).

L. The director may adopt rules to implement the groundwater savings program prescribed by this section for the Tucson active management area that include an applicable conversion multiplier and necessary parameters to ensure groundwater savings in the Tucson active management area if the director determines that all of the following apply:

1. Groundwater withdrawals in the Tucson active management area over a period of one hundred years will exceed the depth-to-static water level of one thousand feet or the depth of the aquifer, whichever is less.

2. A groundwater savings program established in the Tucson active management area would reduce groundwater use over the next one hundred years.

3. Expanding the program to include the Tucson active management area would be in the best interest of that active management area and of a conservation district.

M. Section 45-114, subsections A and B govern administrative proceedings, rehearing or review and judicial review of final decisions of the director pursuant to this section.

N. On application to the director by the current owner of the acres associated with the relinquishment, the director shall restore a relinquished irrigation grandfathered right and rescind all issued groundwater savings credits if the groundwater savings credits have not been pledged to a certificate of assured water supply or a designation of assured water supply pursuant to section 45-576, subsection M.

O. A person that applies to relinquish an irrigation grandfathered right in exchange for groundwater savings credits may accompany the application with a request that the director issue a temporary permit to irrigate with groundwater. On relinquishment of the irrigation grandfathered right, and only if a request accompanies the application to relinquish an irrigation grandfathered right, the director shall issue to the holder of the groundwater savings credit a temporary permit to irrigate with groundwater.

P. The holder of a temporary permit to irrigate with groundwater issued pursuant to subsection O of this section is authorized to use groundwater for irrigation on the land that qualified as irrigation acres under the relinquished irrigation grandfathered right, as if the right had not been relinquished, subject to all of the following:

1. All requirements and limitations of this chapter and of the relinquished irrigation grandfathered right that would apply as if the right had not been relinquished.

2. The applicable management goal and the applicable management plan for the active management area where the lands to which the relinquished irrigation grandfathered right was appurtenant are located, as if the right had not been relinquished.

3. A farm that is authorized to use groundwater pursuant to a temporary permit to irrigate with groundwater may not maintain a flexibility account pursuant to section 45-467, except that if the amount of groundwater used to irrigate the farm in an accounting period exceeds the amount of the current irrigation water duty for the farm multiplied by the water duty acres in the farm, the holder of the temporary permit to irrigate with groundwater may obtain credits registered to the flexibility account of another farm pursuant to section 45-467.

4. The temporary permit to irrigate with groundwater may be leased for an irrigation use with the land that is entitled to be irrigated under the temporary permit.

5. The temporary permit to irrigate with groundwater terminates two years after the director issues the groundwater savings credits unless one of the following occurs earlier, which immediately terminates the temporary permit to irrigate with groundwater:

(a) the relinquished irrigation grandfathered right is restored.

(b) the associated groundwater savings credits are pledged to a certificate of ASSURED water supply or designation of assured water supply and the certificate of assured water supply is issued or the designation of assured water supply is issued or modified to include the groundwater savings credits.

(c) A person who proposes to offer subdivided lands as defined in section 32-2101, for sale or lease on land that is entitled to be irrigated under the temporary permit obtains a written commitment of water service for the proposed subdivision as defined in section 32-2101 from a city, town or private water company designated as having an assured water supply pursuant to section 45-576.

(d) The acres associated with the relinquishment qualify as member land of a conservation district as provided by title 48, chapter 22.

6. For the purposes of chapter 3.1 of this title relating to the storage of water, water that a person delivers pursuant to a temporary permit to irrigate with groundwater is classified as water delivered to the relinquished irrigation grandfathered right to determine the annual or long-term storage credits a permit holder may accrue pursuant to a groundwater savings facility permit.

O. q. For the purposes of this section:

1. "Acres associated with the relinquishment" means land to which the irrigation grandfathered right that is relinquished in exchange for groundwater savings credits was appurtenant.

2. "Municipal provider" has the same meaning prescribed in section 45-561.

3. Stored water recovered outside the area of impact does not include long-term storage credits issued to the Arizona water banking authority or held by the Arizona water banking authority at any time.

4. "Well" includes a replacement well as prescribed in section 45-597 or 45-598.END_STATUTE

Sec. 2. Section 45-494, Arizona Revised Statutes, is amended to read:

START_STATUTE45-494. Withdrawals by irrigation districts in initial active management areas

In an initial active management area established pursuant to section 45-411:

1. An irrigation district existing and engaged in the withdrawal, delivery and distribution of groundwater as of January 1, 1977 shall have the right, subject to section 45-496 and section 45-493, subsection D:

(a) To withdraw and transport groundwater within its service area for the benefit of landowners within its service area, and the landowners are entitled to use the groundwater delivered, provided that claims of landowners to irrigation grandfathered rights, or type 1 or non-irrigation grandfathered rights or type 2 non-irrigation grandfathered rights or pursuant to a temporary permit to irrigate with groundwater issued pursuant to section 45-465.05 shall be subject to article 5 of this chapter.

(b) If legally withdrawing and transporting groundwater from outside its service area for use within its service area as of January 1, 1977, to continue to withdraw and transport the amount of groundwater legally being withdrawn as of January 1, 1977.

2. An irrigation district that was not engaged in the withdrawal, delivery and distribution of groundwater as of January 1, 1977 shall be limited to the right, subject to section 45-496, to:

(a) Contract for surface water from a multi-county water conservation district and deliver and distribute such water within its service area for irrigation purposes.

(b) If, as of January 1, 1983, the district had been recommended by the director to receive an allocation of municipal and industrial water from the central Arizona project, contract for surface water from a multi-county water conservation district and deliver such surface water to cities, towns or private water companies for municipal, industrial and domestic purposes, subject to the following conditions:

(i) The cities, towns and private water companies shall distribute the water within the boundaries of the district in effect as of the date of validation of the district's central Arizona project subcontract.

(ii) In contracting for the delivery of such surface water, the district shall offer the water, first, to cities and towns that distribute water to land within the boundaries of the district or to land adjacent or contiguous to the district and, second, if the cities or towns are unwilling or unable to take and distribute such surface water, to private water companies within the boundaries of the district that have not been recommended to receive or have not received an allocation of municipal and industrial water from the central Arizona project.

(iii) Notwithstanding article 5 of this chapter, the original owner and any new owner of a type 1 non-irrigation grandfathered right created pursuant to section 45-469 that is appurtenant to land in the district to which such surface water is distributed by a city, town or private water company may use groundwater withdrawn pursuant to that right only on the land to which the right is appurtenant.

(iv) The district may amend its contract, or execute a new contract, with the United States secretary of the interior and a multi-county water conservation district to provide for the conversion of irrigation water deliveries to municipal and industrial water deliveries as provided by law and pursuant to the secretary's regulations relating to conversion, but such amendment may be made or new contract executed only if the amount of municipal and industrial water for which the district would qualify by conversion of lands from irrigation to non-irrigation uses exceeds the secretary's initial express allocation of municipal and industrial water to the district for the year 2034 and only to the extent of the excess.

(v) Such surface water shall not be distributed by any city, town or private water company to any land with respect to which an allocation of municipal and industrial water from the central Arizona project has been made or recommended for some person other than the district.

(d) Withdraw, deliver and distribute within its service area the amount of groundwater allowed by the current irrigation water duty of each member farm multiplied by the water duty acres in that farm less, including each member farm authorized to use groundwater for irrigation pursuant to a temporary permit to irrigate with groundwater issued pursuant to section 45-465.05, minus any portion of such amount withdrawn by individual members.

(e) Continue but not expand any non-irrigation water service being lawfully provided as of the date of the designation of the active management area, except as provided in subdivision (b) of this paragraph and in section 45-497, subsection B.END_STATUTE

Sec. 3. Temporary permits to irrigate with groundwater; time frame; fee; delayed repeal

A. On application by a holder of groundwater savings credits that were issued before the effective date of this act, the director of the department of water resources shall issue to the holder of groundwater savings credits a temporary permit to irrigate with groundwater that authorizes the use of groundwater subject to the limitations prescribed in section 45-465.05, subsection P, Arizona Revised Statutes, as added by this act.

B. The director of the department of water resources may not issue a temporary permit to irrigate with groundwater to a holder of groundwater savings credits that were issued before the effective date of this act if either of the following has occurred:

1. More than two years have elapsed after the issuance of the groundwater savings credits.

2. Any condition prescribed in section 45-465.05, subsection P, paragraph 5, Arizona Revised Statutes, as added by the act, has occurred.

C. An application submitted pursuant to subsection A of this section is subject to a new licensing time frame and application fee. The licensing time frame and application fee shall be the same as the licensing time frame and application fee established through rule for an application to relinquish an irrigation grandfathered right in exchange for groundwater savings credits under section 45-465.05, Arizona Revised Statutes, as amended by this act.

D. This section is repealed from and after January 1, 2029.