BILL ANALYSIS SB 565 Page 1 Date of Hearing: August 4, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 565 (Pavley) - As Amended: August 2, 2010 Policy Committee: Water, Parks and Wildlife Vote: 7-6 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill provides the State Water Resources Control Board with new authority and resources to investigate and prosecute unauthorized diversions and uses of water, and increases consequences for failing to report water diversions and uses. (Summary continued below.) FISCAL EFFECT 1)Ongoing annual costs (Water Rights Fund) to the water board ranging from $400,000 to $800,000 to: a) Conduct hearings to identify diverters who must prepare and submit technical and monitoring reports and determine which parties should pay for the reports and the amounts they should pay. b) Review revision report orders, upon request or at the water board's own motion. c) Review reports. d) Develop penalties that apply to small farms for de minimis water right violations. e) Establish fee schedules for those newly required to report "statements of diversion and use" and collecting new fees. 2)Increased annual revenue of an unknown amount, but potentially $200,000 to $400,000, from requiring additional types of water diverters to pay annual fees to the water board for filing statements of diversion and use. (Water Rights Fund) This revenue would directly offset GF costs that would otherwise be used to pay for processing of statements of diversion and use. SB 565 Page 2 3)Increased annual revenue of an unknown amount, but potentially in the hundreds of thousands of dollars, from new and increased penalties for unauthorized diversion and use, failure to comply with cease and desist orders, and failure to file or material misstatements on a statement of diversion or use. (Water Rights Fund) 4)Increased annual revenue of an unknown amount, but potentially in the tens of thousands of dollars, from penalties that apply to small farms for de minimis water right violations. (Water Rights Fund) SUMMARY (continued) Specifically, this bill: 1)With proposed new authority and resources, the water board may: a) Order a water diverter to submit technical or monitoring reports that are within the diverters possession. b) In the case of a large diverter-meaning one that diverts 200 or more acre feet of water per year-prepare and submit technical or monitoring reports, unless doing so would create a material hardship. c) Charge other diverter's a portion of the cost of the report if a report covers several diversions. d) Enter a diverter's property to investigate water use violations. 2)Sets the maximum civil liability amounts for unauthorized diversion or use or failure to comply with a cease and desist order issued by the board at either (a) a specified schedule of dollar amounts or (b) the highest market value of the water diverted. 3)Adds the following types of water uses to those requiring annual fees to cover costs for administration, monitoring, and enforcement: a) small domestic uses; b) livestock stockpond use; c) petitions to change point of diversion, place of use, or purpose of use of a water right not subject to permit, SB 565 Page 3 including riparian rights and appropriative rights established prior to 1914. (Annual fees on holders of riparian water rights and pre-1914 water rights are to bear a fair or reasonable relationship to the payer's burden on, or benefits from, the board's water rights program.) 4)Increases consequences for failing to report water diversions and uses, such as: a) Adds "statements" to the list of actions for which failure to pay a fee may result in cancellation of a water right. b) Allows the board or a court to impose an enhanced fine on those who illegally divert or use water that is equal to 150% of the annual fees the diverter or user would have paid for legal diversion or use. c) Requires the water board to establish a schedule of penalties that apply to small farms for de minimis water right violations. d) Allows the water board or a superior court to establish a penalty, not to exceed $500 per day, for: i) Violations of a reporting or monitoring requirement, material misstatements in any record or report, or tampering with or rendering inaccurate any monitoring device required under the reporting or monitoring requirement. ii) Violations of any term or condition of certain permits, licenses, certificates, or registrations or any order or regulation adopted by the water board to prevent waste or unreasonable use of water. e) Adds a rebuttable presumption of nonuse-which could lead to forfeiture of a water right-for failure to submit a statement of water use. COMMENTS 1)Rationale . Supporters describe this bill as implementing many of the recommendations of the Delta Vision Blue Ribbon Task Force by providing tools to ensure proper reporting of water diversion and use, establishing reporting incentives, and SB 565 Page 4 increasing fines for illegal diversions. 2)Background . a) Water Use, Rights, Permitting and Enforcement . The California Constitution requires all water use to be beneficial and not wasteful. Generally, there are two types of water use in California: i) Riparian -Use of water on property adjacent to a stream for agricultural or domestic use. Does not require a permit from the water board, though the board asks riparian users to report diversions in a statement of diversion and use. ii) Appropriative -Taking water for use on a property not adjacent to the body of water from which diversion is made. Requires a permit from the water board, unless appropriative right precedes 1914 (when California changed water use laws). (Groundwater use is a third type of use, but, generally, it does not require a permit and is not monitored by the state.) The State Water Resources Control Board issues permits for water use and enforces violations of use permits and the Constitution. This enforcement may include cancellation of use permits. b) Delta Vision and the Water Package of 2009 . SB 1574 (Kuehl, Chapter 535, Statutes of 2006) directed the Secretary for Resources to convene a committee to develop a strategic vision for a sustainable Delta, known as the "Delta Vision." Later that year, the governor issued an executive order, which required, among other things, an independent Blue Ribbon Task Force to submit to the Delta Vision Committee and the governor a strategic plan to implement the Delta Vision, which was to be recommended to the Legislature. In 2008, the task force delivered its finding to the secretary, who summarized, interpreted and prioritized the task force's findings in a report describing implementation of the Delta Vision. Among the many recommendations in the secretary's report was one to enhance and expand the water SB 565 Page 5 board's water rights administrative accountability. In 2009, the Legislature sought to enact many of the recommendations of the Delta Vision report. A number of bills included provisions addressing many of the recommendations included in the report. At one point, those bills included provisions similar to the elements contained in this bill. Ultimately, the Legislature passed a five-bill package, which addressed Delta governance, groundwater use and reporting, water conservation, water use reporting and enforcement, and funding through an $11 billion bond proposal. The final package, however, did not include the provisions included in this bill. There are conflicting stories as to why these enforcement and reporting provisions were left out of the water package, and as to whether there was an agreement to move these provisions this year. 3)Support . Supporters include East Bay Municipal Utility District, several environmental organizations and others, who contend this bill provides the water board with authorities consistent with those recommended by Delta Vision. They argue the bill will benefit the public and all the state's water users by: (a) requiring monitoring by all water diverters; (b) authorizing monetary penalties for monitoring and reporting violations; and (c) creating adequate penalties for unauthorized diversions and violations. 4)Opposition . Opponents include numerous public and private water agencies, industry groups and others, who express numerous concerns with the bill. Among those concerns: a) The board can require water users to fund and perform expensive reports, in some cases for purposes that provide public benefits but not directly benefit the water user. b) Penalties for unauthorized diversions and uses of water could be calculated on the highest market value of the water, which may be very costly, difficult to determine or, in some instances, nonexistent, and subject various types of users, such as small farmers, to the costs of other types of users, such as commercial developers. c) Substantial penalty amounts may be applied not just to illegal diversions of water but to technical reporting errors, too. d) Increased scope of new fee provisions and the amount of SB 565 Page 6 fees. e) Increased reporting requirements. f) Potential forfeiture of water rights for failure to pay fees. Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081