SUMMARY OF ARIZONA WATER LAW
By Hugh Holub
Attorney at Law
October, 2009
I. SURFACE WATER LAW
Surface water rights are regulated pursuant to A.R.S. 45-141 through 167. A surface water right is appurtenant to a specific parcel of land, but the point of diversion can be changed and the uses can be changed through administrative proceedings before ADWR.
The amount of water available under a surface water right is subject to climatic variability and prior right appropriations. The doctrine of "prior appropriation" applies to surface water, which basically means first in time is first in right.
The right to the use of surface water must be maintained at a minimum of every 5 years, with few exceptions. If the use is not made over a 5 year period (unless the use was not made through no fault of the owner) the right reverts back to the state.
Surface waters, so long as they are not used in conjunction with groundwater supplies, are limited in use solely by the total quantity of the right, and actual availability of the water, and priority.
All surface water rights in the Gila River Basin are subject to a pending adjudication before the Superior Court of the State of Arizona, and claims for water rights filed by the Gila River Indian Tribe against all water rights holders and claimants in the Gila River Basin. As the adjudication and Indian claim are still in the initial stages of determination, no decision or opinion can be rendered as to the potential impact of the adjudication or Indian claim on this, or any other surface water right in the Gila River Basin. Groundwater rights may also be subject to the Gila Adjudication.
II. GROUNDWATER
Under Arizona law the state is divided between areas called Active Management Areas (AMA) and areas which are not yet designated for Active Management. The Santa Cruz River Basin and the Avra/Altar Basin (encompassing the Avra Valley, Tucson, Green Valley and, Marana) are located within the Tucson Active Management Area (TAMA). ARS 45-411 to 421. Pinal County, Maricopa County, the area around Prescott, and Santa Cruz County are also in Active Management Areas. A map of the state’s AMA follows.
Outside of AMAs there are no groundwater rights per se. The doctrine of "reasonable use" applies. It is only in AMAs where groundwater rights are quantified and regulated.
In an AMA, groundwater rights and uses are highly regulated due to a long history of groundwater overdrafts (the pumping out of groundwater in greater quantities than replenished by natural recharge). ARS 45-101.
There are several types of groundwater rights:
(A) IRRIGATION GRANDFATHERED GROUNDWATER RIGHTS
There are two types of groundwater rights associated with irrigation: Irrigation Grandfathered Groundwater Rights and Type 1 Non-irrigation Grandfathered Groundwater Rights.
(1) Irrigation Grandfathered Groundwater Rights (IGRs) are appurtenant to irrigated lands. The amount of an IGR is based on the "irrigation duty acres" times the "irrigation water duty". Thus, a parcel of land with 100 "irrigation duty acres" and an "irrigation water duty" of 5.0 acre feet per acre, will have an IGR of 500 acre feet. The amount of an IGR decreases over time as the ADWR revises the irrigation water duty with each Management Plan. An IGR can only be used for irrigation purposes on the "irrigation duty acres".
(2) The owner of an IGR may covert its IGR irrigation rights to a Type 1 Non-irrigation Grandfathered Groundwater Right (called a Type 1 Right). The Type 1 Right is either 3 acre feet per "irrigation duty acre" or the actual "irrigation water duty" per acre, whichever is less. A.R.S. 45-469. Thus, if a farm had 100 acres of "irrigation water duty" land with a 5 acre foot per acre "irrigation water duty" it would convert to a Type 1 Right at 3 acre feet per acre, or a total of 300 acre feet per annum of Type 1 Rights. A Type 1 Right can be used on the appurtenant land, or used off the appurtenant land so long as it is withdrawn from the appurtenant land.
To convert the IGR to a Type 1 right, the applicant must show a plan for the use of the converted right pursuant to A.R.S. 45-573.
The amount of the IGR and/or the Type 1 Right can be obtained from the Arizona Department of Water Resources. Certificates for these water rights are issued by ADWR.
(B) SERVICE AREA GROUNDWATER RIGHTS
Service Area groundwater withdrawal rights are created pursuant to A.R.S. 45-491 through 498 and relate to groundwater rights and uses within "service areas" of cities and towns as defined in A.R.S. 45-402 (26) and for "private water companies" as defined in A.R.S. 45-402 (25).
A Service Area Right includes the right for the removal of any absolute volumetric limitation upon the amount of groundwater that may be withdrawn from these wells for the benefit of landowners and residents with the Service Area, subject to whatever conservation requirements may be imposed under the Management Plan(s) prescribed by A.R.S. 45-561 through 576. A "Service Area" is where a utility has an operating distribution system.
A Service Area Right allows the owner to increase the amount of groundwater withdrawn, and to install larger pumps on the wells consistent with applicable rules and regulations, to serve increased water demands. New Service Area Right wells can be drilled within the "Service Area" as defined by ADWR.
This is a very unique groundwater right in that it is the only increasing right to withdraw groundwater permitted in an Active Management Area.
Typically cities and private water companies have Service Area rights.
(C) TYPE 2 RIGHTS
There are two kinds of Type 2 Non-irrigation Grandfathered Groundwater Rights, both of which are associated with groundwater uses that existed prior to 1980 for non-irrigation purposes. These are:
(a) Type 2 Unrestricted: This Type 2 Right is typically associated with wells serving dairies, trailer parks, industries, guest ranches, and other commercial uses. This right my be transferred anywhere in the same AMA.
(b) Type 2 Mining, Sand and Gravel: This Type 2 Right is associated with mining and sand and gravel operations, and may be transferred and used anywhere in the same AMA only for mining and/or sand and gravel uses.
A Type 2 Right is a personal property right in that it can float, and is not necessarily appurtenant to a parcel of land at the point of sale.
(D) PERMIT RIGHTS
There are a number of Groundwater Withdrawal Permit options available pursuant to A.R.S. 45-511 et.seq. for dewatering, mineral extraction, industrial uses, poor quality groundwater removal, hydrologic testing, etc. ADWR grants Industrial Use permits for specific uses where alternative sources of water are not available.
(E) MANAGEMENT PLAN REQUIREMENTS
Municipalities and private water companies who pump groundwater for municipal use are subject to increasingly stringent water conservation requirements imposed through a succession of Management Plans adopted every 10 years, measured by Gallons Per Capita Per Day (GPCD). Arizona is into its Third Management Plan phase (2000 through 2010), and GPCD requirements for municipal water use have been set for all municipal utilities and private water companies in the state's AMAs. ARS 45-561 to 45-578.
A key element of the state's groundwater laws for AMAs is the designation of a goal for each AMA. The Tucson AMA's goal is to achieve "safe yield" by the year 2025, meaning that no more groundwater can be pumped and used than is naturally or artificially replenished. ARS 45-562. Presently municipal users alone in the Tucson AMA pump and use more groundwater than is naturally replenished.
The Santa Cruz Active Management Area has a significantly different goal. It’s goal is to maintain safe yield and to prevent any long term declines in local water tables.
A companion element of the state's groundwater laws is that no new subdivisions are allowed in an AMA unless proof is made that the new subdivision will have a 100 year assured supply of water (called the Assured Water Supply provision). ARS 45-576.
In 1995, the Arizona Department of Water Resources (ADWR) revised its rules governing proof of a 100 year assured water supply, aimed at reducing the amount of mined groundwater a water utility or new subdivision can count for purposes of such proof. The argument was that it is inconsistent with the goal of "safe yield" in the TAMA to permit further municipal growth in Arizona AMAs dependent on mined groundwater.
III . STATUTORY ASSURED WATER SUPPLY REQUIREMENTS
ARS 45-576 and resulting policies and rules establish requirements for new subdivision development in an Active Management Area. As a condition of approving a new subdivision plat, a water supply sufficient for 100 years must be proven to the satisfaction of the Arizona Department of Water Resources (ADWR).
An "assured water supply" means:
1. Sufficient groundwater or surface water of adequate quality will be continuously available to satisfy the water needs of the proposed use for at least one hundred years.
2. The projected water use is consistent with the management plan and achievement of the management goal for the active management area; and
3. The financial capability has been demonstrated to construct the delivery system and any treatment works necessary to make the supply of water available for the proposed use. ARS 45-576 (L).
There are two terms used on the context of the Assured Water Supply requirement—a Certificate of Assured Water Supply, and a designation of an assured water supply.
A Certificate of Assured Water Supply is a document issued to a developer for its project and represents both a determination of hydrologic water availability and proof of the financial capability required under the code.
Cities, towns and water companies do not get certificates of assured water supply from ADWR. Instead, the service areas of water utilities are Designated as having a hydrologic supply based on proof provided by the utility. Within the 100 year designated assured water supply area, an individual developer can gain its Certificate of Assured Water Supply by showing ADWR its project is within a designated area, and that there is an agreement whereby the water facilities will be paid for and constructed (typically a main extension agreement) to meet the financial capability requirement.
The Assured Water Supply requirement only applies to the approval of new subdivisions. Thus new utility customers can be added to a water utility system provided that their development did not involve approval of a subdivision plat.
A primary goal of the new proposed Assured Water Supply rules is to reduce reliance on mined groundwater for urban growth.
IV. ASSURED WATER SUPPLY RULES
The goal of ADWR in its new Assured Water Supply Rules is to require the applicant for a designation or certificate of assured water supply to prove it has a 100 year assured water supply based on using renewable sources of water. There are four renewable sources of water:
(A) Central Arizona Project ( CAP).
(B) Surface waters.
(C) Effluent (direct reuse).
(D) Recharge Credits (through underground storage and recovery project, indirect recharge, or in the case of Nogales, instream recharge).
The reasoning for this approach is an attempt to reconcile the Management Plan goal for the TAMA ("safe yield" meaning no more groundwater is withdrawn than is naturally or artificially replenished) with the Assured Water Supply requirement of the 1980 Groundwater Management Act (requiring proof of a 100 year assured water supply for new subdivisions).
The Assured Water Supply Rules are divided into five criteria:
(1) Physical Availability.(R12-15-703) This means that sufficient quantities of water must be continuously available to satisfy the water demand of the development (or city) for 100 years. This element has a hydrologic component, a continuous availability component, and a legal rights component.
The maximum allowable depth to groundwater permitted under the new rules is 1,000 feet for the TAMA. However, the actual mining of groundwater is limited by the new rules to a complex formula of allowable mining and required replacement. A utility could theoretically continue to use mined groundwater, provided the resulting depth to groundwater in 100 years would not exceed 1,000 feet in the Tucson AMA, and also provided that some sort of "payback" mechanism was in place to replace that mined groundwater. Any developer or water utility seeking to continue to pump groundwater, even with a "payback" mechanism (such as recharge) would have to prove the hydrologic availability of the groundwater within the 1,000 foot limitation.
The 1,000 foot criteria is not used in the Santa Cruz AMA.
If surface water is proposed as an element of the Assured Water Supply, the volume of that surface water that could be counted would be 120% of the firm yield of the source unless alternative supplies were available. Flows would be based on a minimum of 20 years of record. The seniority of the appropriative right is a major factor in this determination.
If CAP water is proposed as an element of the Assured Water Supply, 100% of the subcontract amount would count if the applicant has a nondeclining, long-term municipal and industrial CAP subcontract.
If effluent is to be used to prove an Assured Water Supply (meaning the effluent would actually be treated and reused), ADWR would analyze the current or projected production of effluent, the applicant's ability to treat that effluent, and the demand for the effluent.
If recharge credits are to be used, ADWR would look at the existence of a contract to obtain the water, the likelihood that the water will be physically available, the applicant's financial capability to purchase the water, the presence of an existing underground storage and recovery project (including an indirect recharge project) and the existence of all required permits.
Another element of Physical Availability is "Continuous Availability". This means that evidence must be provided showing adequate storage, delivery and treatment works for the proposed supply. The variability of surface water and/or effluent would also be considered.
A final element of Physical Availability is "Legal Availability". That means the applicant must show it has the legal rights to the water it is claiming for Assured Water Supply proof.
(2) Water Quality. (R12-15-704) The water relied on for the projected growth must be of sufficient quality to be actually used.
The Water Quality aspect of proving an Assured Water Supply relates to the physical quality of the water. Contaminated groundwater, for example, could not be used to prove an Assured Water Supply, unless it was to be treated to potability standards.
(3) Consistency With Management Plan Goal.(R12-15-705) The purpose of this element is to quantify ( and limit) the volume of mined groundwater that can be pumped and used for Assured Water Supply proof purposes.
ADWR has proposed a highly complex means to ratchet down groundwater reliance for new urban growth, focused on water uses as opposed to water rights.
The first component is a Groundwater Allocation Formula.
Under this approach, a water provider would be allocated 30 years of mined groundwater based on a determined amount of groundwater at the beginning point of the Assured Water Supply decision and phased down to zero in 30 years. The total quantity of groundwater identified through this formula could be used over the course of the 100 year period.
Assuming, for discussion purposes, an applicant could show 1,000 acre feet of mined groundwater in year one, the applicant would get roughly 15,000 acre feet of mined groundwater allocated for assured water supply purposes for the 30 year period, or an average of 150 acre feet of groundwater per year for the 100 year period.
ADWR also proposes an "incidental recharge credit" adding a small quantity of groundwater use for an Assured Water Supply.
ADWR further proposes "credits" for retiring IGRs at the rate of 1.5 acre foot per irrigated duty acre times the number of years between when the farm is retired and the year 2025. Thus if an applicant bought a farm with 1,000 acres of irrigation duty land with IGR rights and retired it in 1996, the applicant could claim 1,500 acre feet of groundwater times 29 years or a total of 43,500 acre feet of mineable groundwater. Over a 100 year period this would allow 435 acre feet of groundwater per year to be mined.
Type 2 Rights can also be "retired" for credits.
Consistency with the Management Plan goals can also be obtained through a combination of proof of physical availability of groundwater plus joining the Central Arizona Groundwater Replenishment District (CAGRD). More about the CAGRD later.
(4) Consistency With Management Plan. (R12-15-706) The purpose of this requirement is to link projected water use within new developments with conservation mandates of the Management Plans.
This element requires the applicant to be in compliance with its current Management Plan conservation requirement. Thus if the applicant is in violation of its Management Plan requirements, it would not be eligible to gain an Assured Water Supply.
(5) Financial Capability. (R12-15-707) This requirement relates to proof of the financial capability of the applicant to construct the water delivery system and any treatment works required for the proposed use. This element details the types of financial assurances that would be available to prove the financial capability to construct and operate the water supply system.
V. OTHER ASSURED WATER SUPPLY RULES ELEMENTS
(A) Redesignation: Every 10 years a city, town or private water company that has had an existing Designation of Assured Water Supply must reapply for a new designation (the "redesignation")..
(B) Financial Proof: Developers are required to meet similar financial assurance requirements as cities and counties apply for approvals of subdivision plats. Cities are required to show bonding capacity sufficient to build the water system to serve the projected growth. Proof for a new development being connected to a city, town or private water company system can be made by bond, letter of credit, or payment of cash to construct the required water system.
(C) Gila Adjudication Issues: All surface water rights in the Gila River Basin are subject to a pending adjudication before the Superior Court of the State of Arizona, and claims for water rights filed by the Gila River Indian Tribe against all water rights holders and claimants in the Gila River Basin. As the adjudication and Indian claim are still in the initial stages of determination, no decision or opinion can be rendered as to the potential impact of the adjudication or Indian claim on this, or any other surface water right in the Gila River Basin.