44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

RELATING TO WATER RIGHTS; ENACTING THE NEW MEXICO WATER BANKING ACT AND AMENDING SECTIONS OF THE NMSA 1978 TO REGULATE WATER BANKING OF CONSERVED AND SURPLUS WATER AND TO ESTABLISH A FUND; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 11 of this act may be cited as the "New Mexico Water Banking Act".

Section 2. [NEW MATERIAL] LEGISLATIVE PURPOSE.--The legislature finds that a reliable and sustainable water supply for current and future needs is imperative for the state's economic growth and prosperity and may be enhanced through water banking. The purposes of the New Mexico Water Banking Act are to:

A. achieve a reliable and sustainable water supply by making better and more extensive use of water resources in the state;

B. develop and apply innovative technologies and management strategies for water conservation, storage, meeting demands and marketing;

C. encourage the conservation of water and ensure that conserved and surplus water is available for other uses and users through transfers administered by the interstate stream commission;

D. permit greater access to known resources of available water to water users who need additional supply;

E. amend water forfeiture statutes to delay their application to water rights deposited in the water bank for use by others who have current needs for water resources;

F. facilitate voluntary transactions that would release water from low-value uses and direct them toward high-value applications and sharing profits from these arrangements with water depositors;

G. provide legal mechanisms for conserving and salvaging water that is otherwise surplus to customary agricultural and other beneficial uses, if any, while preserving the rightful possession of a water right, permit or license;

H. permit public uses of unused, conserved or surplus water rights for the benefit of the public interest;

I. provide a market conduit for unused, conserved or surplus water rights and resources;

J. provide an alternative to forfeiture of water rights by permitting transfers administered by the interstate stream commission; and

K. promote economic development in the state by providing alternative water availability solutions for agricultural, environmental, municipal, industrial, commercial, recreational and residential interests in the state.

Section 3. [NEW MATERIAL] DEFINITIONS.--As used in the New Mexico Water Banking Act:

A. "commission" means the interstate stream commission;

B. "deposit" means the placement of a water right or portion of a water right in the water bank for transfer;

C. "depositor" means the owner of a water right who deposits the water right or a portion of the water right in the water bank;

D. "transfer" means the conveyance of a water right or a portion of a water right by sale or lease;

E. "water bank" means the New Mexico water bank;

F. "water right" means a right acquired or authorized pursuant to the laws of this state to impound, divert or use surface water or ground water to the extent authorized by law; and

G. "withdrawal" means the removal of a deposit in the water bank by the depositor.

Section 4. [NEW MATERIAL] INTERSTATE STREAM COMMISSION--ADDITIONAL POWERS AND DUTIES.--The commission shall:

A. administer, implement and enforce the New Mexico Water Banking Act;

B. administer, operate and regulate the water bank;

C. appoint and fix the salary of a full-time water banking director who shall serve at the pleasure of the commission, and pursuant to the direction of the commission, the director shall employ such employees as are proper and necessary and prescribe their duties and compensation;

D. encourage water rights owners to implement water conservation practices;

E. educate the public, including political subdivisions of the state, about the water bank and the benefits of depositing water in the water bank;

F. establish requirements for a deposit of a water right or portion of a water right into the water bank, including:

(1) terms and conditions for deposit and withdrawal, including the procedure and penalties for early withdrawal;

(2) the procedure for determining eligibility of water rights for deposit;

(3) the procedure and formula to quantify water rights to be deposited;

(4) the eligibility of water rights for deposit, considering legal entitlement, ownership, validity, recent historical use and absence of legal restrictions;

(5) the priority order, if any, of water rights to be leased or sold by the water bank; and

(6) monitoring to determine and penalties for improper use of deposited or transferred water;

G. administer the transfers of water rights from the water bank, including:

(1) making annual determinations of available deposited water to be transferred;

(2) making annual determinations of the fees for transfer of deposited water;

(3) establishing the formula to calculate the annual pro rata interest of each depositor in transfers made during the previous year and computing each depositor's entitlement of proceeds;

(4) negotiating the terms of a transfer;

(5) maintaining a registry of deposits and persons who have registered with the water bank and identifying a beneficial use for additional water supplies; and

(6) informing persons listed on its registry about water rights available from the water bank;

H. purchase, hold and sell water rights in its own name;

I. negotiate and contract for or acquire the use of surface facilities or reservoirs or underground aquifers to store deposited water not transferred during any year of its term of deposit;

J. determine compliance with the necessary standards for stored water, considering the obligations of the commission pursuant to surface storage reservoir contracts and applicable interstate compacts, if any;

K. establish ground water storage and recovery standards, in conjunction with other state agencies having authority regarding water injection schemes or water quality, for deposited water not including oil and gas water to be injected through direct surface or direct subsurface methods into underground aquifers;

L. subject to Sections 10 and 11 of the New Mexico Water Banking Act, establish fees to be paid to the water bank fund for transfers and the administrative and operational costs of the water bank and the commission;

M. establish procedures for making, transferring or withdrawing a deposit; determining the priority of transfers, the reports and records of a transfer and the fees associated with transfers; and other actions;

N. report annually to the legislature regarding deposits, withdrawals and transfers made, identifying the number of persons and water rights involved in all deposits, withdrawals and transfers; existing and anticipated future storage needs of the water bank; and other operations of the water bank and the commission;

O. promulgate rules to implement the New Mexico Water Banking Act and to administer, operate and regulate the water bank;

P. contract with any person to achieve or further the purposes of the New Mexico Water Banking Act;

Q. file suit in its own name and be sued; and

R. take all other actions necessary or advisable to facilitate deposits and transfers and to achieve or further the purposes of the New Mexico Water Banking Act.

Section 5. [NEW MATERIAL] NEW MEXICO WATER BANKING ACT EXCLUSIVE.--Water rights shall not be banked or eligible for storage in either surface facilities or reservoirs or underground aquifers in this state, except in accordance with the New Mexico Water Banking Act, authorizations of law and contracts of the state valid on the effective date of the New Mexico Water Banking Act and compacts valid on or after the effective date of that act; provided that the water bank may accept water rights of Indian nations, tribes or pueblos for banking and storage in accordance with the terms of that act.

Section 6. [NEW MATERIAL] DEPOSITED WATER RIGHTS-- USES--PUBLIC INTEREST USE.--

A. In accordance with rules promulgated by the commission, a water right or portion of a water right deposited in the water bank during the term of the deposit may:

(1) not be used by the depositor, his heirs, successors or assignees;

(2) be transferred, stored or used for public interest uses by the water bank in accordance with the New Mexico Water Banking Act, rules of the commission and as otherwise permitted by law; or

(3) be withdrawn by the depositor in accordance with the New Mexico Water Banking Act, the rules of the commission and the terms of the deposit.

B. During the term of the deposit, water that is neither transferred nor stored during any year may be used for in-stream environmental, recreational, flushing or other public interest uses, as determined by the commission; provided that the public interest use shall not interfere with any obligation, compact or other interest of the state.

Section 7. [NEW MATERIAL] STORAGE IN SURFACE FACILITIES AND RESERVOIRS AND UNDERGROUND AQUIFERS--RECOVERY OF DEPOSITED WATER.--The commission may store deposited water in surface facilities or reservoirs or underground aquifers in the state during the term of the deposit subject to law and interstate compacts. The commission may promulgate rules to implement storage and recovery of deposited water in and from surface facilities and reservoirs and underground reservoirs.

Section 8. [NEW MATERIAL] PRESUMPTION OF NON-IMPAIRMENT.--A transfer by the commission of a deposited water right for any year, during the term of the deposit, shall create a rebuttable presumption that the transfer does not impair existing water rights and is neither contrary to the conservation of water within the state nor detrimental to the public welfare of the state. Unless the state engineer objects to the transfer within thirty days of written notice of the intended transfer by the commission to the state engineer, the transfer is deemed approved by the state engineer and the transfer may occur, subject only to objection by an objector substantially and specifically affected by the one-year transfer of the deposited water right. Upon any objection, the transfer shall be reviewed by the state engineer, who shall provide his findings to the commission about the transfer and the objection. If the state engineer objects to the transfer or determines that the transfer may adversely affect the objector, the commission shall rescind or modify the transfer to avoid any adverse effect on the objector's water right.

Section 9. [NEW MATERIAL] DEPOSITS--EXEMPT FROM FORFEITURE.--A water right, eligible for deposit as determined by commission rule, may be deposited in the water bank for a term of up to ten years and may be transferred annually during the deposit term, pursuant to the terms of the New Mexico Water Banking Act and rules promulgated pursuant to that act. During the deposit term, a deposited water right is exempt from forfeiture pursuant to Sections 72-5-28, 72-6-3 and 72-12-8 NMSA 1978.

Section 10. [NEW MATERIAL] FEES AND REPORTS.--

A. Fees shall be imposed on each transfer of water rights on deposit with the water bank and for administration and operation of the water bank.

B. By rule, the commission shall set:

(1) the administration and operation fees to be charged to and paid by the transferee of each deposited water right to the water bank;

(2) annually, the transfer fees to be paid by the transferee to the water bank, considering the type and duration of the transfer and the amount, quality and intended use of the deposited water rights to be transferred; and

(3) the percentage of the transfer fee to be paid to the depositor for the transfer made and the percentage of the transfer fee retained by the water bank for making the transfer.

C. By rule, the commission shall establish the procedures for setting the fees imposed by this section and procedures for the calculation and payment of the percentage of the transfer fee to be paid to the depositor.

D. Fees may be imposed or paid for public interest uses of deposited water rights made pursuant to Subsection B of Section 6 of the New Mexico Water Banking Act.

Section 11. [NEW MATERIAL] WATER BANK FUND CREATED--FUNDING.--There is created in the state treasury the "water bank fund" to be used solely for the administration and operation of the water bank by the commission. The water bank fund is to be financed by appropriations from the general fund to the commission, fees assessed and collected by the commission in administering the New Mexico Water Banking Act and such other financing as is permitted by law. Income or interest earned on the investment of the fund shall remain in the fund. Money in the water bank fund is appropriated to the interstate stream commission for the purpose of carrying out the provisions of the New Mexico Water Banking Act. Money shall be expended pursuant to warrant issued by the department of finance and administration pursuant to vouchers signed by the water banking director of the commission. Any unexpended or unencumbered balance of the water bank fund shall not revert to the general fund but shall remain on deposit in the fund for administrative and operating costs of the water bank.

Section 12. [NEW MATERIAL] OTHER TRANSFERS.--Nothing in the New Mexico Water Banking Act shall prevent the sale or purchase of water or water rights by or through persons other than the commission to the extent permitted by and in accordance with law.

Section 13. [NEW MATERIAL] CONSERVATION OF WATER RIGHTS.--Subject to Section 5 of the New Mexico Water Banking Act, the amount of water rights conserved by a water right owner may be deposited in the water bank in the amount conserved, subject further to commission rule establishing eligibility terms for the conserved water deposit and the calculation of the water conserved.

Section 14. Section 72-5-28 NMSA 1978 (being Laws 1907, Chapter 49, Section 42, as amended) is amended to read:

"72-5-28. FAILURE TO USE WATER--FORFEITURE.--

A. When the party entitled to the use of water fails to beneficially use all or any part of the water claimed by him, for which a right of use has vested for the purpose for which it was appropriated or adjudicated, except the waters for storage reservoirs, for a period of four years, such unused water shall, if the failure to beneficially use the water persists one year after notice and declaration of nonuser given by the state engineer, revert to the public and shall be regarded as unappropriated public water; provided, however, that forfeiture shall not necessarily occur if circumstances beyond the control of the owner have caused nonuse, such that the water could not be placed to beneficial use by diligent efforts of the owner; and provided that periods of nonuse when irrigated farm lands are placed under the acreage reserve program or conservation reserve program provided by the federal Food Security Act of 1985, P.L. 99-198, shall not be computed as part of the four-year forfeiture period; and provided, further, that the condition of notice and declaration of nonuser shall not apply to water [which] that has reverted to the public by operation of law prior to June 1, 1965.

B. Upon application to the state engineer at any time and a proper showing of reasonable cause for delay or for nonuse or upon the state engineer finding that it is in the public interest, the state engineer may grant extensions of time, for a period not to exceed three years for each extension, in which to apply to beneficial use the water for which a permit to appropriate has been issued or a water right has vested, was appropriated or has been adjudicated.

C. Periods of nonuse when water rights are acquired by incorporated municipalities or counties for implementation of their water development plans or for preservation of municipal or county water supplies shall not be computed as part of the four-year forfeiture statute.

D. A lawful exemption from the requirements of beneficial use, either by an extension of time or other statutory exemption, stops the running of the four-year period for the period of the exemption, and the period of exemption shall not be included in computing the four-year period.

E. Periods of nonuse when the nonuser of acquired water rights is on active duty as a member of the armed forces of this country shall not be included in computing the four-year period.

F. The owner or holder of a valid water right or permit to appropriate waters for agricultural purposes appurtenant to designated or specified lands may apply the full amount of water covered by or included in the water right or permit to any part of the designated or specified tract without penalty or forfeiture.

G. Periods of nonuse when water rights are acquired and placed in a state engineer-approved water conservation program, by an individual or entity that owns water rights, a conservancy district organized pursuant to Chapter 73, Articles 14 through 19 NMSA 1978, a soil and water conservation district organized pursuant to Chapter 73, Article 20 NMSA 1978, an acequia or community ditch association organized pursuant to Chapter 73, Article 2 or 3 NMSA 1978, an irrigation district organized pursuant to Chapter 73, Articles 9 through 13 NMSA 1978 or the interstate stream commission shall not be computed as part of the four-year forfeiture period.

H. Periods when water rights are deposited in the New Mexico water bank pursuant to the New Mexico Water Banking Act shall not be computed as part of the four-year forfeiture period."

Section 15. Section 72-12-8 NMSA 1978 (being Laws 1931, Chapter 131, Section 8, as amended) is amended to read:

"72-12-8. WATER RIGHT FORFEITURE.--

A. When for a period of four years the owner of a water right in any of the waters described in Sections 72-12-1 through 72-12-28 NMSA 1978 or the holder of a permit from the state engineer to appropriate any such waters has failed to apply them to the use for which the permit was granted or the right has vested, was appropriated or has been adjudicated, the water rights shall be, if the failure to beneficially use the water persists one year after notice and declaration of nonuser given by the state engineer, forfeited and the water so unused shall revert to the public and be subject to further appropriation; provided that the condition of notice and declaration of nonuser shall not apply to water [which] that has reverted to the public by operation of law prior to June l, l965.

B. Upon application to the state engineer at any time and a proper showing of reasonable cause for delay or for nonuse or upon the state engineer finding that it is in the public interest, the state engineer may grant extensions of time, for a period not to exceed three years for each extension, in which to apply to beneficial use the water for which a permit to appropriate has been issued or a water right has vested, was appropriated or has been adjudicated.

C. Periods of nonuse when irrigated farm lands are placed under the acreage reserve program or conservation reserve program provided by the federal Food Security Act of l985, P.L. 99-l98, shall not be computed as part of the four-year forfeiture period.

D. Periods of nonuse when water rights are acquired and placed in a state engineer-approved water conservation program by an individual or entity that owns water rights, an artesian conservancy district, a conservancy district, a soil and water conservation district organized pursuant to Chapter 73, Article 20 NMSA 1978, an acequia or community ditch association organized pursuant to Chapter 73, Article 2 or 3 NMSA 1978, an irrigation district organized pursuant to Chapter 73, Articles 9 through 13 NMSA 1978 or the interstate stream commission shall not be computed as part of the four-year forfeiture statute.

E. A lawful exemption from the requirements of beneficial use, either by an extension of time or other statutory exemption, stops the running of the four-year period for the period of the exemption, and the period of exemption shall not be included in computing the four-year period.

F. Periods of nonuse when water rights are acquired by incorporated municipalities or counties for implementation of their water development plans or for preservation of municipal or county water supplies shall not be computed as part of the four-year forfeiture statute.

G. Periods of nonuse when the nonuser of acquired water rights is on active duty as a member of the armed forces of this country shall not be included in computing the four-year period.

H. The owner or holder of a valid water right or permit to appropriate waters for agricultural purposes appurtenant to designated or specified lands may apply the full amount of water covered by or included in that water right or permit to any part of the designated or specified tract without penalty or forfeiture.

I. Periods when water rights are deposited in the New Mexico water bank pursuant to the New Mexico Water Banking Act shall not be computed as part of the four-year forfeiture period."

Section 16. APPROPRIATION.--Two hundred fifty thousand dollars ($250,000) is appropriated from the general fund to the water bank fund for expenditure in fiscal year 2000 and subsequent fiscal years by the interstate stream commission for the purpose of carrying out the provisions of the New Mexico Water Banking Act. Any unexpended or unencumbered balance remaining at the end of any fiscal year shall not revert to the general fund.