HOUSE 3rd Reading Unamended March 17, 2015 HOUSE Amended 2nd Reading March 16, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-0055.01 Thomas Morris x4218 HOUSE BILL 15-1222 HOUSE SPONSORSHIP Becker K., SENATE SPONSORSHIP Sonnenberg, House Committees Senate Committees Agriculture, Livestock, & Natural Resources A BILL FOR AN ACT Concerning an authorization of pilot projects for the voluntary transfer of water efficiency savings to the Colorado water conservation board for instream use purposes in water divisions that include lands west of the continental divide. 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.) The bill authorizes the Colorado water conservation board to select the sponsors of up to 12 pilot projects for the board's acquisition of water efficiency savings for instream flow use without the need for a water court-decreed change of water right. The board may approve up to 5 pilot projects in any one water division, but only in divisions 4, 5, 6, and 7. In order to be able to collect sufficient data, each project should operate for at least 10 years. The board cannot accept an application for a pilot project after July 1, 2020. Each pilot project must cease operations within 10 years after its approval and after the conclusion of any water court appeals; except that if no claim of injury due to the operation of a pilot project has been filed or if all such claims have been resolved to the satisfaction of the party who filed the claim, the board may extend the operation of the pilot project for up to an additional 15 years. The board will establish criteria and guidelines for the pilot projects. The bill specifies procedures for the board's consideration of pilot project applications, including ways to resolve claims of injury to other water rights through the imposition of terms and conditions to prevent injury. The amount of water efficiency savings acquired by the board cannot be more than the minimum amount necessary to preserve the natural environment to a reasonable degree. A party can appeal the board's determination with the appropriate water judge within 35 days after the board's decision has been mailed to the appropriate water clerk. A party may also file comments with the board by January 1 of the year following each year that a pilot project is operated concerning potential injury to such party's water rights due to the operation of the pilot project, in which case the original procedural safeguards must again be followed. By December 31, 2025, the board will file a report with the general assembly that evaluates and makes recommendations regarding the pilot projects' operation. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, 37-92-102, amend (3) as follows: 37-92-102. Legislative declaration - basic tenets of Colorado water law - report - repeal. (3) (a) Further recognizing the need to correlate the activities of mankind human beings with some reasonable preservation of the natural environment, the Colorado water conservation board is hereby vested with the exclusive authority, on behalf of the people of the state of Colorado, to appropriate in a manner consistent with sections 5 and 6 of article XVI of the state constitution, such waters of natural streams and lakes as the board determines may be required for minimum stream flows or for natural surface water levels or volumes for natural lakes to preserve the natural environment to a reasonable degree. In the adjudication of water rights pursuant to this article and other applicable law, no other person or entity shall be granted a decree adjudicating a right to water or interests in water for instream flows in a stream channel between specific points, or for natural surface water levels or volumes for natural lakes, for any purpose whatsoever. (b) (I) The board also may acquire, by grant, purchase, donation, bequest, devise, lease, exchange, or other contractual agreement, from or with any person, including any governmental entity, such water, water rights, or interests in water that are not on the division engineer's abandonment list in such amount as the board determines is appropriate for stream flows or for natural surface water levels or volumes for natural lakes to preserve or improve the natural environment to a reasonable degree. (II) At the request of any person, including any governmental entity, the board shall determine in a timely manner, not to exceed one hundred twenty days unless further time is granted by the requesting person or entity, what terms and conditions it will accept in a contract or agreement for such acquisition. Any contract or agreement executed between the board and any person or governmental entity that provides water, water rights, or interests in water to the board shall be is enforceable by either party thereto as a water matter under this article, according to the terms of the contract or agreement. (III) The board shall adopt criteria for evaluating proposed contracts or agreements for leases or loans of water, water rights, or interests in water under this subsection (3), including but not limited to, criteria addressing public notice, the extent to which the leased or loaned water will benefit the natural environment to a reasonable degree, and calculation of the compensation paid to the lessor of the water based upon the use of the water after the term of the lease. As a condition of approval of a proposed contract or agreement for a lease or loan of water, water rights, or interests in water pursuant to this subsection (3), the board shall must obtain confirmation from the division engineer that the proposal is administrable and is capable of meeting all applicable statutory requirements. (IV) All contracts or agreements entered into by the board for leases or loans of water, water rights, or interests in water pursuant to this subsection (3) shall must require the board to maintain records of how much water the board uses under the contract or agreement each year it is in effect and to install any measuring devices deemed necessary by the division engineer to administer the contract or agreement and to measure and record how much water flows out of the reach after use by the board under the contract or agreement, unless a measuring device already exists on the stream that meets the division engineer's requirements. All contracts or agreements for water, water rights, or interests in water under this subsection (3) shall must provide that, pursuant to the water court decree implementing the contract or agreement, the board or the lessor, lender, or donor of the water may bring about beneficial use of the historical consumptive use of the leased, loaned, or donated water right downstream of the instream flow reach as fully consumable reusable water. (c) The board shall must file a change of water right application or other application with the water court to obtain a decreed right to use water for instream flow purposes under a contract or agreement for a lease or loan of water, water rights, or interests in water pursuant to this subsection (3). The resulting water court decree shall must quantify the historical consumptive use of the leased or loaned water right and determine the method by which the historical consumptive use should be quantified and credited during the term of the agreement for the lease or loan of the water right. Said The method shall must recognize the actual amount of consumptive use available under the leased or loaned water right and shall must not result in a reduction of the historical consumptive use of that water right during the term of the lease or loan, except to the extent such the reduction is based upon the actual amount of water available under said the rights. All water rights under such decrees shall be administered in priority. (d) The board may not accept a donation of water rights that either would require the removal of existing infrastructure without approval of the current owner of such infrastructure or that were acquired by condemnation. The board may use any funds available to it for acquisition of water rights and their conversion to instream flow rights. (e) (I) The board may initiate such applications as it determines are necessary or desirable for utilizing water, water rights, or interests in water appropriated, acquired, or held by the board, including applications for changes of water rights, exchanges, or augmentation plans. Prior to the initiation of any such appropriation or acquisition, the board shall request recommendations from the division of parks and wildlife, The board also shall request recommendations from the United States department of agriculture, and the United States department of the interior. (II) Nothing in this article shall be construed as authorizing any state agency to acquire water by eminent domain or to deprive the people of the state of Colorado of the beneficial use of those waters available by law and interstate compact. Nothing in this subsection (3) shall impact affects section 37-60-121 (2.5). (f) Any appropriation made pursuant to this subsection (3) shall be is subject to the following principles and limitations: (a) (I) Any such appropriation which that is based upon water imported from one water division to another by some other appropriator shall does not, as against the appropriator of such imported water or his or her successor in interest, constitute a claim, bar, or use for any purpose whatsoever. (b) (II) Any such appropriation shall be is subject to the present uses or exchanges of water being made by other water users pursuant to appropriation or practices in existence on the date of such appropriation, whether or not previously confirmed by court order or decree. (c) (III) Before initiating a water rights filing, the board shall determine that the natural environment will be preserved to a reasonable degree by the water available for the appropriation to be made; that there is a natural environment that can be preserved to a reasonable degree with the board's water right, if granted; and that such environment can exist without material injury to water rights. (c.5) (IV) Notwithstanding section 37-92-103 (6), as to any application filed by the board on or after July 1, 1994, the board may not acquire conditional water rights or change conditional water rights to instream flow uses. (d) (V) Nothing in this section is intended or shall be construed to allow condemnation by this state or any person of easements or rights-of-way across private lands to gain access to a segment of a stream or lake where a water right decree has been awarded to the Colorado water conservation board. (e) (VI) All recommendations, including those of the United States, which that are transmitted to the board for water to be retained in streams or lakes to preserve the natural environment to a reasonable degree must be made with specificity and in writing in order that any appropriation made by the board may be integrated into the statewide system for the administration of water rights. Filings for appropriations by the board shall must be consistent with other appropriations and with the requirements of this article. (g) (I) Notwithstanding any reference to consumptive use or any other provision in this subsection (3) to the contrary, the board may acquire nonconsumptive water efficiency savings for instream flow use on a pilot project basis without the need for a water court-decreed change of water right pursuant to this paragraph (g). This subsection (3) applies to such acquisition except to the extent that a provision of this subsection (3) other than this paragraph (g) is inconsistent with an acquisition of water that was historically not consumed. (II) (A) After a period of notice and comment, the board may, in consultation with the state engineer and upon consideration of all comments submitted, select the sponsors of up to twelve pilot projects for the board's acquisition of water efficiency savings for instream flow use pursuant to the approval process set forth in this paragraph (g). The board shall not itself sponsor a pilot project, but the board may provide financial, technical, or other assistance to a pilot project pursuant to the board's other activities and programs. The board may approve up to five pilot projects in any one division and shall not approve any pilot projects in a division other than division 4, 5, 6, or 7. (B) In order to be able to collect sufficient data, each project should operate for at least ten years. The board shall not accept an application for a pilot project after July 1, 2020. Each pilot project must cease operations within ten years after its approval and after the conclusion of any water court appeals; except that, if no claim of injury due to the operation of a pilot project has been filed pursuant to sub-subparagraph (C) of subparagraph (VII) of this paragraph (g) or if all such claims have been fully resolved by the board and the state engineer and after the conclusion of any water court appeals, the board may, upon application by the project sponsor and after following the procedures specified in its criteria and guidelines established pursuant to subparagraph (III) of this paragraph (g), extend the operation of the pilot project for up to an additional fifteen years. (III) After providing a reasonable opportunity for public comment and consideration of any comments received, the board, in consultation with the state engineer, shall establish criteria and guidelines for its considerations of applications for the acquisition of water efficiency savings for instream flow and for the extension of the period of operation of a pilot project, including at least the following: (A) An application fee; (B) The information to be included in the application, including a description of the proposed pilot project; (C) A time period of at least sixty days within which the board must receive comments on the application after providing notice pursuant to the process set forth in subparagraphs (IV) and (V) of this paragraph (g). The comments may include: Claims of injury; terms and conditions that the person filing a comment believes should be imposed on the pilot project in order to prevent injury to other vested water rights, decreed conditional water rights, or contract rights to water; and other information that the person filing the comment believes the board should consider in reviewing the application. (D) Criteria for a conference between a pilot project applicant, the state engineer, and owners of water rights or a contract right to water that file comments on the application, including the following requirements: The conference participants must meet within thirty days after final comments on the application have been submitted; at the conference, the conference participants must discuss how the pilot project could be structured to prevent material injury to other vested water rights, decreed conditional water rights, and contract rights to water; and within fifteen days after the conference, the pilot project applicant and the owners of water rights or contract rights to water must file a joint report with the board and with the state engineer outlining any agreed-upon terms and conditions for the proposed pilot project and explaining the reasons for failing to agree on any terms and conditions for the proposed pilot project if the applicant and the owners fail to reach a full agreement at the conference; (E) Guidelines for the operation and administration of the pilot projects to assure that a pilot project will effect only a temporary change in the use of the water efficiency savings in such a manner that stream conditions are maintained in time, place, and amount, including replacement of return flows, as necessary to avoid material injury to other vested water rights, decreed conditional water rights, or contract rights to water and will not adversely affect Colorado's entitlements or obligations under interstate compacts or United States supreme court equitable apportionment decrees; (F) Criteria for selecting pilot projects that range in size and complexity; (G) Criteria for selecting pilot projects over a five-year period ending on July 1, 2020, to provide a window for potential pilot project sponsors to apply; and (H) A requirement for periodic reports and a final report to the board on the operation of the pilot projects. (IV) (A) For approval of a pilot project, the applicant must provide written notice of the application, including, at a minimum, a description of the proposed pilot project and an analysis of the efficiency savings expected to be gained for instream use, historical diversions, and a plan for implementing the project in a way that prevents injury. (B) The applicant must provide the written notice by first-class mail or electronic mail to all parties that have subscribed to the substitute water supply plan notification list described in section 37-92-308 (6) for the division in which the water efficiency savings are located and in which they will be used as well as by printing in the water resume for that division. The applicant must file proof of the written notice with the board. (V) After consideration of the comments and any conference reports submitted pursuant to sub-subparagraph (D) of subparagraph (III) of this paragraph (g), the board may approve the pilot project application if: (A) The state engineer has made a written determination that the operation and administration of the pilot project will effect only a temporary change in the use of the water right in such a manner that stream conditions are maintained in time, place, and amount, through replacement of return flows, as necessary to avoid material injury to other vested water rights, decreed conditional water rights, or contract rights to water and will not adversely affect Colorado's entitlements or obligations under interstate compacts or United States supreme court equitable apportionment decrees; (B) The amount of water efficiency savings acquired by the board is not more than the amount that the board determines is appropriate as the minimum amount necessary to add to the stream flows to the extent necessary to preserve the natural environment to a reasonable degree pursuant to this subsection (3); and (C) The board adopts all terms and conditions recommended by the state engineer. (VI) When the board approves or denies a pilot project application, it shall serve a copy of the decision, along with a copy of the state engineer's written determination and any conference reports submitted pursuant to sub-subparagraph (D) of subparagraph (III) of this paragraph (g), upon each party to the application by first-class mail or by electronic mail if requested by a party. (VII) (A) Neither the board's approval nor the denial of a pilot project creates any presumptions, shifts the burden of proof, or serves as a defense in any legal action that may arise concerning the pilot project. The board's approval or denial of a pilot project application and the state engineer's written determination on the application are final agency actions that may be appealed. An appeal pursuant to this subparagraph (VII) must be filed with the appropriate water judge and be made within thirty-five days after the board's decision has been mailed to the appropriate water clerk. (B) The water judge shall expedite the appeal, which must be de novo and use the procedures and standards set forth in sections 37-92-304 and 37-92-305 for determination of matters referred to the water judge by the referee; except that a party's failure either to appeal all or any part of the board's decision or the state engineer's written determination or to state any grounds for the appeal shall not be deemed by the water judge to preclude the party from raising any new claim of injury in a future proceeding before the water judge. The pilot project applicant is deemed to be the applicant for purposes of the procedures and standards that the water judge applies to the appeal. (C) By January 1 of the year following each year that a pilot project is operated, a party may file comments with the board concerning potential injury to such party's water rights, decreed conditional water rights, or contract rights to water due to the operation of the pilot project. The procedures of this paragraph (g) regarding notice, opportunity to comment, the board's decision, and an appeal of such decision regarding any new claims of injury shall again be followed with regard to such party's comments. (VIII) Water efficiency savings that have been acquired pursuant to this paragraph (g) are not subject to abandonment while under contract with the board for potential instream flow use. (IX) The board may acquire the right to use the water efficiency savings for instream flow use only pursuant to a contract entered into pursuant to this paragraph (g). The contract must identify: (A) The amount of water efficiency savings to be acquired and the reduced rate of diversion; (B) The flow rate of the instream flow right; (C) The stream reach within which the water efficiency savings will be used as instream flow, the upstream terminus of which must be no higher than the historic point of diversion and the downstream terminus of which must be no lower than the lowest point of historic return flows; and (D) All terms and conditions necessary to avoid injury. If there are vested water rights, decreed conditional water rights, or contract rights to water between the upstream terminus and downstream terminus of the identified instream flow reach, the contract must ensure the maintenance of the stream conditions on which such intervening water rights historically relied, including the replacement of return flows in the identified reach, as necessary to avoid material injury. (X) If so requested by the water right owner, the contract must include conditions pursuant to which the water right owner who implements the structural improvements referred to in section 37-92-103 (11.5) (a) may divert the original decreed diversion rate if: (A) The board discontinues its use of the instream flow right; and (B) No enlargement of the water right results. (XI) (A) The board shall consider practices and agreements, formal and informal, among potentially affected water users when considering whether or not to place a call for any instream flow use derived from water efficiency savings. (B) The board may amend or discontinue a pilot project when making decisions pursuant to subparagraphs (V) to (VII) of this paragraph (g). (XII) The general assembly hereby declares that the purpose of this paragraph (g) is to promote and encourage use of these increased efficiency measures in order to provide the board with water for instream flow purposes in appropriate areas within water divisions 4, 5, 6, and 7. (XIII) By December 31, 2025, the board and state engineer shall file a report with the agriculture, livestock, and natural resources committee of the house of representatives and the agriculture, natural resources, and energy committee of the senate, or their successor committees, that evaluates and makes recommendations with regard to: (A) The board's process of and standards for acquiring water efficiency savings for instream flow use; (B) Lessons learned from implementation of the pilot projects; and (C) The state engineer's administration of water efficiency savings for instream flow use. (XIV) (A) The director of the board shall file written notice with the revisor of statutes at the first to occur of the following: No applications for approval of a pilot project have been filed by July 1, 2020, or approved by the board by July 1, 2022; or all pilot projects that have been approved by the board have ceased operations. (B) This paragraph (g) is repealed, effective September 1 of the year following the year in which the revisor of statutes receives the written notification pursuant to sub-subparagraph (A) of this subparagraph (XIV). SECTION 2. In Colorado Revised Statutes, 37-92-103, add (11.5) as follows: 37-92-103. Definitions - repeal. As used in this article, unless the context otherwise requires: (11.5) (a) "Water efficiency savings" means an amount of water, as determined by the state engineer in consultation with the Colorado water conservation board for pilot project purposes pursuant to section 37-92-102 (3) (g), by which ditch seepage, surface runoff, return flow, or tail-water return will be reduced as a result of structural improvements that increase the efficiency of water storage, diversion, conveyance, application, or use practices associated with a water right. (b) Water efficiency savings can be derived only from: (I) Water that is not consumed under existing practices; and (II) Water rights that are used solely for agricultural irrigation or stock watering purposes in water division 4, 5, 6, or 7. (c) "Water efficiency savings" does not include: (I) Water derived from the salvage of tributary waters by the eradication of phreatophytes; or (II) Any portion of historic water diversions that were not decreed or that were not reasonably efficient as determined by the state engineer in consultation with the Colorado water conservation board pursuant to section 37-92-102 (3) (g). (d) This subsection (11.5) is repealed, effective when section 37-92-102 (3) (g) is repealed. SECTION 3. Applicability. This act applies to water efficiency savings acquired on or after the effective date of this act. SECTION 4. 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.