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Spring 2017 Issue
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Welcome to the Spring 2017 Issue of Water & The Law.  We hope you will find this newsletter to be helpful and informative.  As always, we welcome your feedback.  If you have questions or comments, please reply to this e-mail or call us at 801-413-1600.
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by David Hartvigsen, Jeffry Gittins, and Nathan Bracken

The 2017 General Session of the Utah Legislature ended on Thursday March 9.  The last day for the Governor to sign or veto bills is March 29, and the effective date for most of the newly enacted bills will be May 9, unless otherwise noted.  Here are the highlights of the water related bills that passed and didn't pass during the session:

Bills That Passed

HB 55 (2nd Sub.) - Government Nonprofit Entity Compliance Amendments
Rep. Kim F. Coleman
This bill requires that certain nonprofit corporations comply with the Open & Public Meetings Act, the Government Records Access & Management Act (GRAMA), and the Fiscal Procedures in the Interlocal Cooperation Act. Under the bill, a nonprofit corporation will qualify as a "governmental nonprofit entity" if it satisfies one of two tests. Under the first test, one or more governmental entities must wholly own or wholly control the nonprofit corporation, unless the corporation receives no operating funding or other financial support from any governmental entity. Under the second test, a governmental entity must have a "controlling interest" in the corporation AND the corporation must do at least one of the following: (1) exercise taxing authority; (2) impose a mandatory fee where membership in the corporation is mandated by law; or (3) receive a majority of its funds from one or more governmental entities, except in those situations in which the governmental entities pay fees, dues, or assessments pursuant to voluntary rather than mandatory membership in the corporation. Importantly, the bill exempts water companies that are not wholly owned by one or more governmental entities until July 1, 2019. 

HB 84 - Water Law - Nonuse Requirements
Rep. Tim Hawkes
This bill, which was recommended by the Executive Water Rights Task Force, clarifies that: (1) an approved nonuse application excuses the requirement of beneficial use from the nonuse application's filing date; (2) the filing or approval of a nonuse application, or a series of nonuse applications, does not constitute beneficial use or protect a water right that is already subject to forfeiture; and (3) a nonuse application does not bar a water right owner from using the water as permitted under the water right or from claiming any available defense against forfeiture. The bill also modifies the procedures for instituting a forfeiture action for nonuse.

HB 118 - Authority of State Engineer
Rep. Tim Hawkes
This bill, which was recommended by the Executive Water Rights Task Force, allows the State Engineer to develop rules regarding the "duty of water" or in other words, a quantification of the maximum amount of water that can be beneficially used, without waste, for a particular purpose. Although the State Engineer and the courts in General Adjudications have used this concept for over 100 years, there is no statutory authority for this concept. This bill gives the State Engineer express authority to do what is already being done with respect to the duty of water.

HB 180 (2nd Sub.) - Water Right Transfer Amendments
Rep. Logan Wilde
This bill modifies Utah Code section 73-3-18 regarding assignment of an unperfected application to appropriate. If an assignment is made using the Division of Water Rights' assignment form, and it is recorded and forwarded to the Division, the assignment will be treated as a report of conveyance for updating title on the Division's database.

HB 181 - State Engineer Fee Application Amendments
Rep. Logan Wilde
This bill, which was recommended by the Executive Water Rights Task Force, updates the name of an "extension of time in which to resume use application" to its current name used elsewhere in the code, i.e., a "nonuse application."

HB 301 (1st Sub.) - Canal Safety Amendments
Rep. Scott D. Sandall
This bill removes a requirement that a canal owner receive notice from a municipality or county of any proposed subdivision located within 100 feet of the canal. The bill adds a more defined requirement that a municipality or county not approve or reject a subdivision that is located within 100 feet of canal until after the municipality has provided at least 20 days' notice of the subdivision to the canal owner so that the canal owner can provide input regarding access to the canal, maintenance of the canal, canal protection, and canal safety. The bill also makes minor changes to the requirement that canal owners provide contact information and canal location information to each municipality and county in which its canal is located.

SB 11 (2nd Sub.) - Water Development Commission Amendments
Sen. Margaret Dayton
This bill renames the State Water Development Commission to the Legislative Water Development Commission and modifies the membership of the Commission. The bill removes all of the non-legislative, non-voting members from the Commission: the state treasurer; two representatives of the Governor's Office, including one representative from the Governor's Office of Management and Budget; nine representatives of different river districts; the executive director of the Department of Natural Resources; the executive director of the Department of Environmental Quality; the commissioner of agriculture and food; a member of the Board of Water Resources; a representative of an organized environmental group; a representative of agricultural production; and a representative with experience with finance and economics. The bill adds that non-voting members can be appointed to two-year terms by the Legislative Management Committee upon recommendation of the Commission co-chairs.  

SB 45 - Retail Water Line Disclosure Amendments
Sen. Karen Mayne
This bill affects public entities that provide culinary water service to customers. The bill requires that twice per calendar year, these public retail water providers must provide a disclosure to its customers that states whether the property owner or the provider is responsible for repairs to the water line that serves the customer. The purpose of this requirement is to give better clarification of where the provider's responsibility for water line maintenance ends and where the property owner's responsibility for water line maintenance begins. The bill modifies Utah Code section 11-8-4, which was enacted in 2016 and requires the same disclosure for sewer service providers relative to sewer line maintenance responsibilities.

SB 63 (1st Sub.) - Nonprofit Corporation Amendments - Water Companies
Sen. Margaret Dayton
This bill modifies the Utah Revised Nonprofit Corporation Act to change the default rule on the transferability of shares in a water company from non-transferrable to transferrable, unless the articles or bylaws of the water company specify otherwise. The bill further specifies that any restrictions on the transfer of shares in a water company must be reasonable, adopted in good faith and for a legitimate purpose, adopted in the best interests of the water company and its shareholders, and not discriminate against any individual shareholder or class of shareholders. The bill also clarifies that a shareholder in a water company has "an equitable, beneficial interest in the use of the water supply of the water company, proportionate to the shareholder's shares in the water company, which is an interest in real property" and has a right to receive his/her proportionate share of the company's water. The bill also expressly allows a water company to purchase delinquent shares of stock and clarifies the process for distributions to shareholders in a water company.

SB 214 (1st Sub.) - Public Water Supplier Amendments
Sen. Jani Iwamoto
This bill originally proposed to modify Utah's instream flow statute (Section 73-3-30) to allow public water suppliers to change perfected water rights for instream use. The substituted bill acknowledged that the instream flow issue is very complex and that additional work and input from a number of stakeholders is necessary before any changes are made to the instream flow statute. The bill encourages the Water Development Commission and the Executive Water Task Force to study possible options for expanding the list of those who can file for instream flow rights.  

SJR 11 - Joint Resolution Regarding the Central Utah Project
Sen. Curtis S. Bramble
This joint resolution urges the United States Congress and the new administration to budget sufficient funds to enable the Bonneville Unit of the Central Utah Project to be completed.

HB 225 - Water Commissioner Amendments
Rep. Scott Chew
This bill exempts the State Engineer from the Utah Procurement Code with respect to the Water Commissioner Fund, but requires the State Engineer to make administrative rules governing the use of the Fund. The bill also clarifies and expands the items that can be paid from the Fund, including benefits for commissioners, expenses approved by a distribution system committee, and administration expenses of a distribution system committee.  

HB 304 (1st Sub.) - Water Conservation Amendments
Rep. Gage Froerer
This bill modifies water conservation plan requirements, including requiring each water conservancy district and each retail water provider to have a water conservation plan that includes goals for reduction in residential, commercial, and industrial uses, and water conservation measures for these same uses, and including landscaping. The bill also changes some recommended components of a water conservation plan into required components, such as information regarding the installation of water efficient fixtures and appliances; retail water rate structures designed to encourage conservation; and existing or proposed regulations designed to encourage conservation, including restrictions on grass landscaping.

HB 444 - Water Appropriation Modifications
Rep. Merrill F. Nelson
This bill clarifies which State divisions, departments, and entities can file applications to appropriate water. The bill adds language that these State entities must go through the same appropriation process as a private property owner would have to go through, and that the State entities have no special rights by virtue of being a public entity or public water supplier.
SB 228 (1st Sub.) - Water Infrastructure Revisions
Sen. J. Stuart Adams
This bill seeks to modify rules about loans from the Board of Water Resources, including a requirement that the Board establish a plan to require loan applicants to submit their project plans for an independent value engineering review to examine ways that the project's value can be increased through reducing costs and improving function.

SB 271 - Canal and Ditch Modifications
Sen. David P. Hinkins
This bill seeks to allow a property owner whose land is crossed by a canal, ditch, drain, or "buried irrigation conduit" to change the location of the canal, ditch, drain, or "buried irrigation conduit," subject to several requirements and limitations. The property owner must provide written notice to the water owner, including detailed plans and specifications prepared by a licenses engineer. The property owner must provide contact information for two other engineers to independently review the plans and specifications, and must pay for the cost of this independent review if the water owner elects to use one of the two engineers suggested by the property owner. Alternatively, the water owner can select its own independent engineer, but is responsible for paying the costs incurred for this independent review. The property owner and water owner must negotiate terms regarding any restrictions or impediments to the flow of water through the water channel. This bill would not allow for culinary water lines or secondary water lines to be moved.

By Nathan Bracken

President Trump Begins the Process of Rescinding the "Waters of the United States" Rule

On February 28, 2017, President Trump signed an executive order directing the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers to rescind the "Waters of the United States" rule. The Obama Administration finalized the rule in 2015 to clarify the scope of Clean Water Act (CWA) jurisdiction following the U.S. Supreme Court's muddled decision in Rapanos v. United States. That decision failed to produce a majority and included three separate opinions, each with its own interpretation of CWA jurisdiction. Supporters of the rule maintain that it provides much needed protections for critical water bodies, while critics have argued that it is impermissibly broad. President Trump's order directs the agencies to develop a new rule based on the narrowest of the three Rapanos opinions, which the late Justice Scalia authored. The process to rescind the rule will likely take years as the Administration develops a new rule and faces certain litigation. 

Second Circuit Court of Appeals Upholds EPA's Water Transfers Rule

In January, the Second Circuit Court of Appeals upheld EPA's so-called Water Transfers Rule. The rule provides that transfers that do not add pollutants to waters that are being moved from one point to another do not require permits under the CWA. The decision, Catskill Mountains Chapter of Trout Unlimited, Inc. v. EPA, reverses a lower court decision that vacated the rule as an unreasonable interpretation of the CWA. The Second Circuit recognized that other interpretations may provide more water quality protections, but found that the rule is nevertheless based on valid considerations, noting that the CWA does not require water quality improvements at any cost and allows states to regulate transfers. The State of Utah and a number of Utah water providers intervened in the case in support of the rule, arguing that requiring CWA permits for transfers would make many western transfers financially and technically infeasible while providing little, if any, water quality benefits.  

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