Colorado Legislative Council Staff

STATE

REVISED CONDITIONAL FISCAL NOTE

General Fund Expenditure Impact

(Replaces Revised Conditional Fiscal Note dated April 2, 1998)

TITLE:            CONCERNING THE REPLACEMENT OF DEPLETIONS FROM NEW WITHDRAWALS OF GROUNDWATER IN WATER DIVISION 3 THAT WILL AFFECT THE RATE OR DIRECTION OF MOVEMENT OF GROUNDWATER IN THE CONFINED AQUIFER, AND, IN CONNECTION THEREWITH, AUTHORIZING THE STATE ENGINEER TO PROMULGATE RULES THAT OPTIMIZE THE USE OF THE GROUNDWATER AND PROVIDE ALTERNATIVE METHODS TO PREVENT INJURY.

Summary of Legislation

            This revised conditional fiscal note is prepared in response to a request for an updated fiscal note pursuant to the provisions of Senate Rule 25 (e) and to provide updated information relevant to the potential fiscal impact of the bill. Upon further review and following subsequent discussions with the Department of Natural Resources, Division of Water Resources and the Department of Law, it has been determined that the fiscal impact identified in the fiscal note dated April 2, 1998 has not changed. The reengrossed bill has not been amended.

            The reengrossed bill would provide that the provisions of this bill would become effective on the effective date of the appropriation for the Rio Grande compact decision support system in House Bill 98-1189. The provisions of this bill would require any well permit application in Water Division 3 (Rio Grande Basin) that affects the rate or direction of movement of water be permitted pursuant to a judicially approved plan for augmentation. The bill, as amended in the House Agriculture Committee, would require that the plan, in addition to all other lawful requirements, recognize that unappropriated water is not made available and injury is not prevented as a result of the reduction of water consumption by nonirrigated native vegetation. Any plan for augmentation would be subject to the requirements of the rules for the withdrawal of such groundwater that are promulgated by the

*The fiscal impact of this bill is conditional on the funding of a study of the Rio Grande Basin that is contained in HB 98-1189. The expenditures of the Department of Law for legal services of $7,680 Cash Fund Exempt to promulgate rules are contained in the expenditures of the Department of Natural Resources for legal services. The Department of Natural Resources has indicated that these costs could be absorbed within their appropriation and would not require any additional appropriation.

State Engineer. Based upon specific study of the confined aquifer system, the bill would require the State Engineer to promulgate necessary rules by July 1, 2001. The bill also would allow the Water Court to retain jurisdiction for the purpose of revising any such decree to comply with the to-be-promulgated rules and regulations.

            The bill would require the State Engineer, in promulgating rules, to recognize that unappropriated water may not be made available as a result of the reduction of water consumption by nonirrigated native vegetation. It also would require that the rules ensure that the water resources of Water Division 3 be developed in a manner that would protect Colorado’s ability to meet interstate compact obligations and to prevent injury to senior appropriators and with due regard for daily, seasonal, and longer demands on the water supply.

            The bill would require the State Engineer and the Colorado Water Conservation Board (CWCB) to proceed with diligence to complete the needed studies. The bill would become effective on the effective date of the appropriation for the Rio Grande compact decision support system in House Bill 98-1189 and would apply to all new and pending applications for applicable well permits.

            The Office of the State Engineer, Division of Water Resources, has indicated that no additional rules would need to be promulgated, prior to the completion of the study, to implement provisions of the bill including the requirement that the State Engineer recognize that unappropriated water is not made available and injury is not prevented as a result of the reduction of water consumption by nonirrigated native vegetation. According the State Engineer, this has never been a consideration in granting well permits.

Background Information

            Scoping study. The CWCB during FY 1997/98 entered into a contract for $55,000 for the purpose of conducting a scoping study as the initial phase of the DSS study of the Rio Grande Basin. A draft of this scoping study is anticipated to be completed by January 16, 1998, with the final scoping study to be completed by January 31, 1998. (It is now anticipated that the scoping study will be completed by April 27, 1998.) The scoping study will identify the necessary data, the related data acquisition costs, and the costs to develop the necessary components of the DSS study. Upon completion of the DSS study, the State Engineer would proceed with diligence to prepare and promulgate the necessary rules.

            Background of Decision Support System (DSS) study. As part of the CWCB’s Long Range Plan adopted in 1994 to develop and implement a statewide water information system, the CWCB has planned for the development of a DSS study for the Rio Grande Basin, beginning with the scoping study. Based on the outcome of the soon-to-be-completed scoping study, the CWCB, in coordination with the State Engineer, will request funding for FY 1998/99 to contract for a DSS study for the Rio Grande Basin. HB 98-1189, concerning the funding of Water Conservation Board projects, provides for $2,000,000 to initiate design of a DSS for the Rio Grande Basin. This is believed to be adequate for the first phase, however the amount may be adjusted to reflect the outcome of the scoping study. The actual cost of the DSS for the Rio Grande Basin will not be known until the completion of the scoping study. However, it is estimated that the DSS study could cost as much as $4,983,000 and require three years to complete.

            The DSS study of the Rio Grande Basin would be funded either from funds from the CWCB Construction Cash Fund, or the Severance Tax Trust Fund, Operational Account, or from General Funds. Based on the board’s support for funding the Colorado River DSS study with construction fund cash funds, it is assumed that cash funds would be requested to support this DSS.

State Expenditures

            Assumption. Any rules which the State Engineer would adopt pursuant to this bill would be required to be based on the DSS study of the affected aquifers. It is assumed that this bill would not require the State Engineer to develop an additional DSS study of the Rio Grande Basin and its affected aquifers in order to promulgate necessary rules for the basin.

            Assuming that the DSS study for the Rio Grande Basin is implemented, it would result in data and models upon which the State Engineer could make a decision as to whether there is a sufficient basis for promulgating rules as authorized by this bill. The State Engineer would promulgate rules beginning in FY 2000/01. The Office of State Engineer regularly promulgates rules and has commonly been able to develop and promulgate rules within their existing resources. The actual costs of the rule making process is dependent on the outcome of the study, the complexity of the rules, and the number of the objections to the rules. The State Engineer believes that the costs of rule making, including attorney costs, could be absorbed within their available appropriations. If the rules resulted in extraordinary objections, the State Engineer may require additional legal services from the Department of Law.

            For the current fiscal year, FY 1997/98, the Department of Natural Resources was appropriated $1,625,723 for 33,870 hours of legal services. Of that amount, $573,696 has been allocated to the Office State Engineer with approximately $100,000 being earmarked for Arkansas River legal issues. The balance of $473,696 is allocated to the State Engineer for general legal services and is based on historic workload. The State Engineer determines the priority of issues that require legal services and requests legal services based on the available resources.

            In the case of the recent Arkansas River “measurement rules” promulgation, the Department of Law spent an estimated 80 hours to review the rules and 80 hours to prepare for a prima facie hearing (required in all basin rules promulgation) for an approximate cost of $7,680. As the result of objections to the rules, the Department of Law spent approximately $57,320 (for a total of $65,000) for costs of discovery and a 10 day trial, including summary judgement motions. To the extent that the complexity of the rules for the Rio Grande Basin are similar to the Arkansas River rules, it is estimated that it would cost the State Engineer $7,680 in legal services to promulgate requisite rules for the Rio Grande Basin and could be absorbed within their allocation of legal services. In recent years, the Office of State Engineer has not used its entire allocation and has returned part of its allocation to the department for reallocation to other divisions. To the extent that the Decision Support System for the Rio Grande Basin is sufficient for the State Engineer to promulgate the necessary rules, no additional spending authority would be required. The fiscal impact of this bill is conditional on the development of the DSS for the Rio Grande Basin.

            The other provisions of the bill would not have a significant impact on the workload of the Division of Water Resources or Colorado Water Conservation Board, Department of Law, or the Water Court, or units of local government. Therefore, the bill is assessed as having a conditional fiscal impact on the Department of Natural Resources.

Spending Authority

            It is the belief of the Office of State Engineer that any additional workload to promulgate necessary rules, including legal costs, could be absorbed within their allocation of the Department of Natural Resources’ appropriation, and would not require any additional appropriation in FY 1998/99 to implement the provisions of this bill.  

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