NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB 512

SOURCES OF INFORMATION

New Mexico Public Utility Commission

Office of the State Engineer/Interstate Stream Commission (OSE/ISC)

SUMMARY

Synopsis of Bill

HB 455 enacts the New Mexico Water Banking Act and establishes a board and an authority to regulate water banking. The funding is both self generated and through an initial $250.0 appropriation from the general fund. The board would be comprised of seven public members appointed by the governor for four year terms, unsalaried but eligible for per diem.

Significant Issues

According to the OSE/ISC, the bill gives the board authority to promulgate rules and regulations. accept water rights and then transfer water rights without a hearing or notice to the public. The OSE feels this could lead to situations where the board accepts or makes transfers of invalid water rights. The agency also believes the bill erodes some authority held by the engineer since the state engineer, ISC chairman and the secretary of the environment are all non-voting ex-officio members of the board.

Some significant aspects of HB 455 include: 1) unless the state engineer objects to a transfer within thirty days of receiving notice, the transfer is deemed approved by the engineer; 2) water rights deposited in the bank are made exempt from forfeiture; 3) the fund is financed by legislative appropriations, fees and any other allowable financing; 4) income in the fund shall not revert back to the general fund and; 5) conserved water can be deposited in the bank and transferred.

FISCAL IMPLICATIONS

HB 455 appropriates $250.0 from the general fund in FY 2000, with unexpended or unencumbered balance not reverting to the general fund. The OSE/ISC maintains that the state engineer would need to review every transfer and if applicable, file objections. In effect, the agency believes the engineer would be overseeing all activities of the New Mexico Water Bank Board.

ADMINISTRATIVE IMPLICATIONS

The bill establishes a new seven member board with salaried personnel to administer the water banking act. According to the OSE/ISC, the Water Bank Board would have unlimited time to prepare water rights deposit proposals for submittal to the OSE. However, the OSE would have only thirty days to research, abstract, field check and verify the validity of a water right. Hence, the agency feels that this would create undue burden to meet deadlines for the Water Bank Board. In addition, since the Water Bank Board has no enforcement authority over water use, the OSE feels that burden of enforcement of any violations that occur within the water banking program would fall upon the engineer.

RELATIONSHIP

HB 455 relates to SB 512 as both bills propose to establish and amend sections of NMSA 1978 to regulate the NM Water Banking Act of conserved and surplus water to create a water bank fund. However SB 512 establishes the ISC to regulate water banking, whereas HB 455 creates the New Mexico Water Bank Board to regulate water banking.

TECHNICAL ISSUES

According to the OSE/ISC, HB 455 is in conflict with many existing water law statutes, effectively repealing them, yet the bill makes no attempt to identify those statutes or to actually repeal them. By allowing water rights transfers under presumptions of non-impairments and water rights validity, the agency feels HB 455 may have the effect of condemning other existing, valid water rights without compensation.

Also, the OSE/ISC concludes that the duties, rules and regulations of the Water Bank Board conflicts with its own regarding the quantification of water rights.

RWP/gm