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

SPONSOR King

ORIGINAL DATE

LAST UPDATED

2-14-07

HB 884

SHORT TITLE Domestic Well Regulation

SB

ANALYST Woods

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Conflicts with HB726 and SB755

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the State Engineer (OSE)

Energy, Minerals and Natural Resources Department (EMNRD)

SUMMARY

Synopsis of Bill

House Bill 884 seeks to define “critical management area" (CMA) for groundwater appropriation

purposes and the criteria for establishing a CMA. This bill also amends 72-12-1.1, setting limits

on water rights associated with new domestic well permits issued under this section. The bill

also provides a mechanism for the transfer of water rights into domestic wells (up to 1 acre-foot).

There is no appropriation attached to this legislation.

FISCAL IMPLICATIONS

EMNRD suggests that the bill may require more capital outlay funding for State Parks Division

(SDP) projects or programs that would require the drilling of a new well, if the demands were

projected to be more than ½ acre-foot. In that event, the agency would have to acquire water

rights and transfer them to the new domestic well.

House Bill 884 – Page

2

If this transfer was in excess of 1 acre-foot, timelines could be delayed due to public notice

requirements.

OSE indicates that approximately 50 additional FTE would be required for the evaluation of

water right transfers for domestic well permits. The required staff will allow the Office of the

State Engineer to maintain the current levels of service in regards to existing administrative

duties. While processing the significantly increased volume of water rights applications requiring

state engineer review that this bill would produce. However, it is noted that OSE supplied no

detailed information as to how it arrived at the “50 additional FTE" number included in its

response.

SIGNIFICANT ISSUES

EMNRD notes that, under the definition of critical management areas in the legislation, this bill

would assist the State Engineer in meeting the requirements of the interstate compacts. If

groundwater use declined, and depending on the conjunctive relationships between groundwater

and surface water in a particular basin, benefits to surface flows might mean additional water

inputs to the State’s reservoirs. If this occurred, it might create better recreational opportunities

at these reservoirs. This, in turn, would allow for economic opportunity in the communities near

reservoirs. However, EMNRD also advises that the need for more capital start-up money to

secure water rights necessary for the expansion of programs by state agencies requiring water in

CMAs would be negatively impacted.

OSE raises a number of issues with this legislation, stating that, the State Engineer, recognizing

the need for regulation of domestic wells, especially in and around the state’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 / requirements.

Further that, that the term “critical management areas" as used in HB 884 is not consistent with

the historic and long accepted use of this term by the state engineer and will likely cause

unnecessary confusion. As defined in HB 884 a “ critical management area" is the equivalent of

a DMWA.

OSE adds that the 2006 Domestic Well Rules and Regulations outline the procedure the state

engineer will follow in declaring DWMAs, 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 District Court. Also, the Office

of the State Engineer has been challenged in Grant County on the Constitutionality of his

issuance of Domestic Well permits. Further, there are two cases currently in the Supreme Court

on this issue. The decisions of the courts on these cases will establish the direction the state

engineer should take regarding domestic wells in NM. It is recommended that the legislature

allow the courts to resolve these cases and either uphold or overturn and the state engineer's

position before enacting this bill or other legislation regulating domestic wells. OSE additionally

raises the following considerations:

.

This bill restricts the authority of the state engineer (Section 3.C.) to limit the amount

of water appropriated from each domestic well to "no less than ½ acre-foot per year

per household" unless the applicant transfers an existing water right to the well. In

House Bill 884 – Page

3

certain areas of the state, wells may have to be restricted to amounts less than the

proposed ½ acre-foot per year - depending on aquifer or stream shortages. The

existing domestic well rules provide for this in DWMA’s.

.

Also, the bill should be amended to require that any water rights transferred into new

domestic wells must come from within that same specially designed area. Otherwise,

the bill will not be an effective tool for controlling declines in the aquifer's water level,

because allowing the transfer (change in point of diversion) of an existing water right

into a new domestic well does not physically bring additional water into the affected

aquifer.

.

Transfers of existing water rights into domestic wells are presently allowed - even

within the areas or districts presently declared by the state engineer. Under existing

law, such transfers of existing water rights retain the "move-from" priority dates and

may be subsequently transferred from the well subject to the provisions of Chapter 72

NMSA 1978.

.

New proposed Section 3(F)(2) provides that applications to transfer a water right of

1.0 acre-foot or less may be exempted from the public notice requirement under

certain conditions. Such an exception is consistent with his present statutory

authority.

.

Subsection 2(E) provides for “critical management areas" having a narrower

applicability than CMAs established by the state engineer. To avoid confusion, the bill

should be amended to use a different term than "critical management area."

.

Subsection 1(D) would allow any owner of land or water rights within a CMA to

petition for reconsideration of the declaration of the CMA. This section would require

the state engineer to consider the petition pursuant to the procedures for the

promulgation of special orders under section 72-2-8 NMSA 1978. These procedures

require the state engineer to publish notice in at least five newspapers of general

circulation before a hearing can be held. Requiring that the state engineer satisfy such

a publication requirement for every petition to reconsider the designation of a CMA

could be significantly burdensome on the office of the state engineer. The bill should

be revised to require the petitioner to publish notice of the petition, or to remove the

provision for reconsideration petitions entirely, since subsection 1(E) requires a review

of the CMA designation every five years.

.

If a water rights application is scheduled for hearing the agency needs to provide the

most realistic assessment. Rigid rules may not make sense for every application but

HB 884 would require their use and certainly will increase staff workload to

unacceptable levels preventing the state engineer from acting in a meaningful time

frame.

PERFORMANCE IMPLICATIONS:

OSE indicates that CMAs in the manner specified and requiring the transfer of water rights may

have a significant impact on the agency's workload. An existing court decree in southwestern

New Mexico requires the transfer of water rights for domestic wells. Further, “Staff advises that

House Bill 884 – Page

4

they devote considerable effort processing these small transfers to ensure the water rights are

valid."

However, EMNRD anticipates that any benefits to surface water flows into the State’s reservoirs

could potentially create improved recreation conditions that could potentially increase state park

visitation and revenue, which are performance measures.

ADMINISTRATIVE IMPLICATIONS:

OSE notes it processes on the average 6,000 to 7,000 domestic well applications per year.

Requiring the transfer of water rights for 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 and for

petitions to reconsider CMA designation will have a significant administrative impact. OSE

offers the following examples:

•

Page 1, lines 22 through 24: The proposed language would require the Office of the State

Engineer to meet the public notification and hearing requirements established in §72-2-8

for the state engineer to establish a CMA. These new CMA’s would differ from existing

CMAs’ established by the state engineer.

•

Page 4, lines 8 through 25: The bill requires the Office of the State Engineer to hold a

hearing before a special order declaring a critical management area becomes effective.

This requirement would prevent the state engineer’s ability to establish a Critical

Management Area in an emergency. Also, requiring a hearing before the special order

becomes effective will create a rush of applications to be filed with the Office of the State

Engineer before the effective date of the special order.

•

Page 7, lines 9-10: The state engineer would be responsible for evaluating applications

for transfer of water rights to domestic wells. This requirement will add significant

administrative review to many domestic well permit applications.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Both OSE and EMNRD indicate conflicts with HB726 and SB755.

AMENDMENTS:

OSE proposes the following amendments:

.

Subsection 1(B) (2), pg. 2, lines 8-9: strike entire provision and insert in lieu thereof:

"(2) additional depletions negatively impact upon the flows of interstate streams.".

.

Subsection 1(C), pg. 2, lines 10-12: strike entire subsection because each management

area has its own unique problems and characteristics. Domestic well permits may have to

be handled differently within each management area depending on the situation and

aquifer/basin characteristics.

.

Subsection 1(D), pg. 2, lines 13-21: strike entire subsection because it would allow any

House Bill 884 – Page

5

person to petition at any time for reconsideration of the designation of a CMA and

require the matter to go to hearing. The public notice requirements for such petitions

could be significantly burdensome on the office of the state engineer. Providing for such

petitions is unnecessary, since section 1.E. already requires a review of the CMA

designation every five years.

.

Subsection 2(G), pg. 5, lines 22-24: strike lines 22 through 24 in their entirety and insert

in lieu thereof "notify persons on the list when 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."

.

Subsection 3.C: strike pg. 6, line 25 through pg. 7, line 6: in their entirety and insert in

lieu thereof: "The state engineer may limit a domestic well diversion within a domestic

well management area to an amount one-quarter acre-feet or less per annum per

household. If multiple households are served by a domestic well the total diversion from

the well shall not exceed three acre-feet per year. Greater well diversions may be

allowed by the transfer of existing water right(s) subject to the provisions of Chapter 72

NMSA 1978.".

.

Subsection 3.D, pg 7, line 7: strike "approve a domestic well" and insert in lieu thereof

"issue a domestic well permit".

.

Subsection 3.D. (2), pg. 7, line 15: after "been" insert "properly".

.

Subsection 3.E, p. 7, lines 16-19: the reference to "water rights obtained" is unclear.

Strike entire section and insert in lieu thereof: "Water rights transferred pursuant to this

section shall retain the priority date of the transferred water right and are transferable to a

new location or purpose of use subject to the provisions of Chapter 72 NMSA 1978.".

.

Subsection 3.F.2.(a), pg. 8, lines 4-7: strike this entire provision because existing statute

already requires the state engineer to perform such review.

.

Amend the bill to provide an additional $5,000,000 per year appropriation to the state

engineer to implement the provisions of the bill. (It is noted that OSE supplied no

detailed information as to how it arrived at the “$5,000,000 per year" projection included

in its response.)

BFW/nt