HOUSE 3rd Reading Unamended February 3, 2014 HOUSE Amended 2nd Reading January 30, 2014Second Regular Session Sixty-ninth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 14-0248.01 Jennifer Berman HOUSE BILL 14-1026 HOUSE SPONSORSHIP Fischer, SENATE SPONSORSHIP Schwartz, House Committees Senate Committees Agriculture, Livestock, & Natural Resources A BILL FOR AN ACT Concerning the authorization of flexible water markets. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) Water Resources Review Committee. Under the anti-speculation doctrine, current water court proceedings governing an application to change the beneficial use of an irrigation water right require the applicant to designate a specific alternative beneficial use identified at the time of the application. The bill creates a more flexible change-in-use system by allowing an applicant who seeks to implement fallowing, regulated deficit irrigation, reduced consumptive use cropping, or other alternatives to the permanent dry-up of irrigated lands to apply for a change in use to any beneficial use, without designating the specific beneficial use to which the water will be applied. Section 1 of the bill defines "flex use" to mean an application of the fully consumptive portion of water that has been subject to a water right change-in-use proceeding to any beneficial use. It also redefines "appropriation" to exclude flex use from the anti-speculation doctrine. Sections 2 and 3 describe the procedures for obtaining a flex use change-in-use decree and a flex use substitute water supply plan. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 37-92-103, amend (3) (b), (4) (b), and (4) (c); and add (4) (d), (7.3), and (7.5) as follows: 37-92-103. Definitions. As used in this article, unless the context otherwise requires: (3) (b) Nothing in this subsection (3) shall affect affects appropriations by the state of Colorado for minimum streamflows as described in subsection (4) of this section or approval of flex use. (4) "Beneficial use" means the use of that amount of water that is reasonable and appropriate under reasonably efficient practices to accomplish without waste the purpose for which the appropriation is lawfully made. Without limiting the generality of the previous sentence, "beneficial use" includes: (b) The diversion of water by a county, municipality, city and county, water district, water and sanitation district, water conservation district, or water conservancy district for recreational in-channel diversion purposes; and (c) For the benefit and enjoyment of present and future generations, the appropriation by the state of Colorado in the manner prescribed by law of such minimum flows between specific points or levels for and on natural streams and lakes as are required to preserve the natural environment to a reasonable degree; and (d) A flex use. (7.3) "Flex consumptive use" means the fully consumptive portion of a water right that has been quantified by either a water court change-in-use decree or a substitute water supply plan approval, entered or approved on or after June 1, 2014, and the return flows associated with the historical use of the water right if appropriated in accordance with the law under a new priority date and confirmed by the water court change-in-use decree in which the fully consumptive use portion of the water right is quantified, that: (a) Identifies the water right as a flex use water right; (b) Quantifies the historical diversions and historical consumptive use of the water right; (c) Quantifies the return flows associated with the historical use of the water right in time, place, and amount; (d) Provides terms and conditions for a change in type of use of the water right that prevent material injury to other vested water rights and decreed conditional water rights, including the return flow obligations in time, place, and amount; (e) If return flows associated with the historical use of the water right are appropriated in accordance with the law under a new priority date, provides terms and conditions governing the use of the appropriated return flows; (f) Permits delivery and use of all or a portion of the consumptive use associated with the water right and any appropriated return flows to a flex use through the implementation of fallowing, regulated deficit irrigation, reduced consumptive use cropping, or other alternative to permanent cessation of agricultural irrigation on the property that is served by the water right; and (g) Establishes a fixed point or points of delivery for the fully consumptive portion of the water right and any appropriated return flows. (7.5) (a) "Flex use" means an application of flex consumptive use to any beneficial use, including a compact obligation, within the water division of historical use. (b) Following delivery of flex consumptive use at the point or points of delivery identified in the applicable change-in-use decree or substitute water supply plan approval, the water user may accomplish flex use by direct delivery; storage; recharge; exchange; water banking; where appropriate, nonconsumptive use; or any other lawful means that comply with applicable decrees, statutory and other legal requirements, and administration by the state engineer and division engineers. SECTION 2. In Colorado Revised Statutes, 37-92-305, add (3.7) as follows: 37-92-305. Standards with respect to rulings of the referee and decisions of the water judge. (3.7) Flex use. (a) If a change-in-use application seeks approval of flex use, the terms and conditions of the decree must comply with section 37-92-103 (7.3) and (7.5). The terms and conditions of the decree must also require that the applicant replace historical return flows in time, place, and amount to prevent material injury to the owners of vested water rights and decreed conditional water rights. (b) A decreed flex use is subject to reconsideration by the water judge on the question of injury to the vested water rights of others for such period after the entry of such decree as is necessary or desirable to remedy or preclude such injury. It is the general assembly's intent that any decreed flex use be implemented in a manner designed to promote the use of alternative transfer methods that encourage and support continuation of irrigated agriculture, while applying the decreed flex use to additional uses. As such, a decreed flex use must be conditioned upon the continuation of irrigation of a portion of the property served by the water right decreed for flex use, subject to fallowing for flex use. The water judge may establish terms and conditions commensurate with the intent of the general assembly expressed herein. At a minimum, a change-in-use decree approving a flex use must provide that the discontinuance of irrigation of the entire property served by the water right decreed for flex use for any single period in excess of three consecutive years nullifies the decreed flex use without any further action of the water judge. In such event, the water right may only be used for the decreed irrigation use unless the owner of the water right obtains a subsequent water court change-in-use identifying the specified end uses of the water right and establishing any additional terms and conditions necessary to prevent injury. SECTION 3. In Colorado Revised Statutes, 37-92-308, add (12) as follows: 37-92-308. Substitute water supply plans - special procedures for review - water adjudication cash fund - legislative declaration - repeal. (12) Flex use. If the state engineer approves a substitute water supply plan application in which the plan sought is for a flex use, the terms and conditions of the approval must comply with section 37-92-103 (7.3) and (7.5). The terms and conditions of the approval must also require that the applicant replace historical return flows in time, place, and amount to prevent material injury to the owners of vested water rights and decreed conditional water rights. SECTION 4. Effective date. This act takes effect June 1, 2014. SECTION 5. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.