Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

2/9/07

HB 726

SHORT TITLE Well Permits in Critical Management Areas

SB

ANALYST Wilson

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$416.7 $5,000.0 $5,000.0 $10,416.7 Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Office of State Engineer provided the projected additional costs

Duplicates SB 755 except short titles are different

Conflicts with HB 884

SOURCES OF INFORMATION

LFC Files

Responses Received From

Energy, Minerals & Natural Resources (EMNRD)

Environment Department (ED)

Department of Transportation (DOT)

State Engineer’s Office (SEO)

SUMMARY

Synopsis of Bill

House Bill 726 redefines the terms by which a land owner may obtain a domestic well permit for

appropriating groundwater in the State of New Mexico.

Currently, the SEO is obligated under law to issue domestic well permits to a landowner who

applies. No determination is currently required as to the non-impairment of existing water rights.

The bill will reduce the amount of appropriated water for each domestic well for household use

regardless of the conditions of management of the declared basin.

For permits for domestic household use, livestock and temporary uses of water such as

prospecting, mining or construction of public works, the bill requires a determination from the

SEO that the new well will not impair existing water rights. Additionally, the bill places

constraints on the location of new livestock watering wells, and lowers the consumptive use from

House Bill 726 – Page

2

temporary wells to one acre-foot.

Under this bill, the SEO also has the ability to declare a low impact area in an area where the

water resources have not been fully appropriated. A designation of an area as a low impact area

will require a “determination" from the SEO that the permitting of small amounts of water will

not impair existing water rights or reduce flows in streams subject to interstate stream compacts.

For low impact management areas, a determination by the State Engineer on a case-by-case basis

regarding impairment of existing water rights is apparently not required. In a low impact area,

the consumptive use for a temporary well is increased to three acre-feet.

The bill has an emergency clause.

FISCAL IMPLICATIONS

The SEO has provided the numbers for the estimated additional operating budget impact. They

base these numbers on the approximately 50 FTEs they claim will be required for the evaluation

of domestic, livestock and temporary permits that will be required by the provisions of this bill.

The SEO states that the additional FTEs will allow the SEO to maintain the current levels of ser-

vice in regards to existing administrative duties and will help offset any potential increase in the

water right application backlog the agency currently holds.

No justification has been provided to justify the personnel requirements.

EMNRD believes the cost of developing new facilities for government agencies requiring the

installation of domestic well to provide drinking water will increase. Additionally, many of

these installations will require more than the proposed quarter acre-foot limitation proposed for

domestic household use. Therefore, state agencies will be required to acquire more water rights

via purchase on open market, thus increasing the cost for development of new facilities.

Additionally, time will be added on to the timeline associated with the development of any

facilities associated with the transfer of water rights from any other location.

SIGNIFICANT ISSUES

The constitution provides that the SEO can only appropriate unappropriated water and senior

water rights be protected. 72-1-1 et. seq. provide that the SEO shall

approve all application

whether or not there is unappropriated water and whether or not there will be impairment to

senior users.

The state engineer, recognizing the need for regulation of domestic wells – especially in and

around NM’s river corridors, promulgated Domestic Well Rules and Regulations on August 15,

2006, which placed a 1.0 acre-foot per annum limitation on domestic wells for household use

and allowed for the creation of Domestic Well Management Areas (DWMA) as well as other

restrictions and requirements.

This rule set outlined the procedure the state engineer will follow in declaring DWMA’s – areas

where domestic wells may negatively impact senior water rights and flows of surface water

sources. The declaration of a DWMA further restricts the amount of water that can be

appropriated for domestic use – down to 0.25 acre-foot per annum or less. This rule set is

currently being challenged in Santa Fe County District Court.

House Bill 726 – Page

3

Both the constitutionality of 72-12-1.1 and the State Engineer’s issuance of Domestic Well

permits have been challenged in several law suits. There are two cases currently in the Supreme

Court relating to the State Engineer’s authority to regulate domestic wells permitted under

existing 72-12-1.1. If any of the lawsuits filed manage to prevail, all domestic, livestock and

temporary use well statutes will be void and those permits will have to be treated in the same

manner as all other wells.

Proponents of this bill state that this bill is intended to put something in place in that event. It

prevents impairment to senior water rights holders while providing for timely processing of

applications within the constraints imposed by New Mexico’s constitution.

SEO states that for the vast majority of the state, domestic wells have minimal impact on aquifer

water level declines. However, numerous domestic wells on small lot parcels may interfere with

the production of other wells in localized mountainous areas. These situations are relatively rare

and several options are presently available to address this concern. The provisions of the New

Mexico Subdivision Act allow the counties an effective avenue to limit the number of domestics

and their withdrawals. The courts have also imposed limitations on domestic well diversions,

and the state engineer has limited domestic well diversions under his existing authority.

The SEO currently designates critical management areas (CMA) as the basis for adopting basin

administrative guidelines for water rights application processing. Impacts from municipal and

irrigation wells were the primary factors in requiring these designations. Providing for low

impact management areas in HB 726 may cause some confusion with existing CMAs.

The process to designate CMAs is technically based and has been in place for decades. CMA

boundaries are established on technical criteria that are consistently applied throughout the state.

Groundwater flow models are used to estimate future water level declines to compare with

existing well depths. If the declines inhibit well production the state engineer will impose strict

limitations. If water supply conditions are variable within a basin multiple layers of restriction

may be required. The areas requiring the greatest level of restriction are referred to as a CMA.

Areas that are not classified as CMA are also regulated to ensure rights are not impaired. A

relatively small portion of the state has been classified as a CMA. All declared basins receive a

high degree of protection regardless of CMA classification.

ADMINISTRATIVE IMPLICATIONS

The SEO claims they processes on the average 6000 to 7000 domestic, stock and temporary well

applications per year. Requiring the evaluation of all domestic wells will require additional

FTEs, the level of which will depend on the degree to which the state engineer will exercise the

provisions of the bill and available funding. The notice and hearing requirements for CMA

designation will have a significant administrative impact as no funding is provided in the bill to

offset increased administrative costs. See the examples the SEO provided:

• Page 6, lines 4-6. The SEO will be responsible for evaluating each application for permit

for domestic, livestock, and temporary use for impairment. This requirement will add

significant administrative review to a domestic well application. The SEO will need to

develop regional and local criteria for evaluating impairment for domestic, livestock, and

temporary use.

House Bill 726 – Page

4

• Page 6, lines 7 through 14: The bill proposes that the SEO make additional threshold

determinations before issuing a permit for domestic use that proposes to use water

outside the household. The SEO will have to determine if a proposed domestic well is

located at least a quarter mile away from the nearest existing well and further determine

if the applicant has justified the need to additional water. Such review will take

significant administrative effort, will require

the Office of the State Engineer to field

check all existing wells (many well locations in the past were permitted to the nearest 40

acre parcel), and require the Office of the State Engineer to upgrade its GIS capabilities

to properly review new domestic well applications.

• Page 6, lines 15 through 19: The bill proposes that the SEO make additional threshold

determinations before issuing a permit for livestock use. Such review will take

significant administrative effort as it will require the SEO to establish a five-mile buffer

zone around perennial rivers and streams statewide, field check existing wells as many

well locations in the past were permitted to the nearest 40 acre parcel and require the

SEO upgrade its GIS capabilities to properly review new livestock well applications.

• Page 7, lines 8 through 13: The bill proposes that the SEO make additional threshold

determinations before issuing a permit for domestic and livestock use. The SEO will

have to determine if a proposed well is located at least a half mile away from the nearest

existing well. Such review will take significant administrative effort, will require SEO to

field check existing wells as many well locations in the past were permitted to the nearest

40 acre parcel and require the SEO upgrade its GIS capabilities to properly review new

domestic well applications.

• Page 8, lines 3 through 7: The bill proposes establishing new review criteria for

evaluating an application for permit to change of point of diversion, place of use, or

purpose of use of a water right. . The SEO recommends the language in the bill should

reference the existing review requirements established in paragraph E of 72-12-3. The

proposed appropriation will not impair existing water rights from the source, is not

contrary to conservation of water within the state and is not detrimental to the public

welfare of the state.

In addition,

t

he bill provides for long-impact area designations for purposes of acting on

domestic, stock watering, and temporary use applications where the SEO finds there to be

unappropriated water; however, it doesn’t provide for areas of the state where there is no

unappropriated water. Also, the bill appears to exclude the use of a domestic well to supply

more than a single household.

DUPLICATION/ RELATIONSHIP

HB 726 duplicates SB 755, except short titles are different and conflicts with HB 884, Domestic

Well Regulation.

TECHNICAL ISSUES

The SEO suggested the following:

House Bill 726 – Page

5

Strike the reference to “Critical Management Areas" and insert in lieu thereof “Domestic

Well Management Areas." There does not appear to be a reason for including “critical

management areas" at Section 1(E) because the term does not appear anywhere else in

the bill

Page 6, line 18. Recommend the term “river or stream “be clarified by changing to"

Perennial River or stream". On page 6, line 18 insert “perennial" before the word “river."

Page 6, lines 21-22. Recommend the term “for longer than" be replaced by “, does not

exceed a one year period". On page 6, line 21 Strike “for longer than" and insert in lieu

thereof “, does not exceed a one year period"

Section 1.E., p.3 & 4, line 24 thru line 1 on page 4. Strike the sentence, “When a special

order proposes to designate a critical or low-impact management area, the order shall not

become effective until after notice and hearing". This sentence should be stricken

because it will or could cause a rush of applications depending on the proposed

restrictions.

Section 1.G., p. 4, line 14 through line 16, strike “at convenient times distribute to these

persons all such regulations, making such charges as will defray the expense incurred in

their physical preparation and mailing." and insert in lieu thereof “notify persons on the

list that new, revised or proposed regulations are available and may be requested from the

state engineer. Such charges as will defray the expense incurred in preparation of copies

and mailing shall be paid by the requestor." Sending copies automatically to a list of

individuals may be an unnecessary effort and expense.

DW/mt