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.








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          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,  








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               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  








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            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  








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               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  








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               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