Washington Water Bank Legislation

Water banks, long used in eastern Washington to compile and transfer water rights, appear to be a useful means of allocating water rights in western Washington. However, water banks may also undergo significant changes due to recent legislative requirements. Even as the Washington State Department of Ecology (Ecology) announces additional water banks in new areas of the state, the 2021-2022 Appropriation Bill contains new requirements that raise the bar for establishing banks. water and the transfer of water rights through them. As more funds were allocated to facilitate the establishment of water banks, the legislature also asked Ecology to take a closer look at the individuals and communities served by private water banks. Water bank builders and buyers could find themselves facing additional regulatory burdens and are urged to closely monitor the ecology that sorts out what this new mandate means for water banks in the state.

WATER BANK – BASIC OVERVIEW

Water banks are a regulatory tool for maintaining water rights or modifying their location and destination of use. In general, a water bank provides a mechanism whereby a water right holder can “deposit” a water right with a public or private entity (the bank) that can put the rights on the water. water available to another person or use in a downstream location. Transactions can be permanent or temporary. The concept behind water banks is that facilitating the buying and selling of water rights through a free market system can help balance water demand and lead to more efficient allocation. of water resources.

In Washington, private water banks should be created in consultation with Ecology. The future banker and Ecology identify a right to use water for mitigation and the needs that the bank would serve. By their nature, water banks are designed to serve a specific set of customers, for example, those downstream from the original diversion point, and sometimes specific functions, such as rights management. interruptible irrigation. Once these are identified, Ecology and the banker negotiate a water trust law agreement, governed by Ecology Trust Water Rights Program, to define the functioning and expectations of the water bank. Ecology assesses the validity of the water right (s) through a Review Report (RE), which is usually made available to the public for review and comment. Upon acceptance and approval of the BR, Ecology issues an order modifying the purpose of the water use right, identifies the amount of water available for mitigation, and provides public notice of the change. Once all public comments are considered, Ecology executes the Water Trust Agreement with the original water right holder. If the right to water is intended to reduce new permanent uses, it is bequeathed to Ecology. Ecology then issues a Trusted Water Certificate and publishes a charge, unit price, and water supply statement available on the Ecology website. Once the bank is operational (and sometimes in tandem with the establishment of the bank), parties seeking water apply to Ecology for mitigation permits which are compensated by the bank. These permits may be intended to improve stream flow, provide more regular irrigation, or allow increased municipal use.

SUCCESS OF THE WATER BANK

Water banks have been successful in eastern Washington, with several banks operating in the Yakima, Columbia, and Walla Walla river basins. These banks have facilitated a myriad of exchanges, including the Walla Walla Exempt Well Mitigation Bank, the Lake Roosevelt and Sullivan Lake Stock Exchange in the Columbia River Basin, and the Darling Water Stock Exchange, LLC in the Yakima River Basin.

Ecology maintains a water bank tracking spreadsheet, which details the source of mitigation fees, available balance, charges and fees, and the geographic extent of adequacy (i.e. service area).

Although not a new concept, the riverbanks are a relatively new phenomenon west of the Cascades. One of the first water banks to be established in western Washington was the Dungeness Water Exchange. It was created in 2013 by Clallam County, Ecology, the Dungeness Water Users Association, the Jamestown S’Klallam Tribe, City of Sequim, Clallam Public Utility District No.1, Clallam Conservation District, Washington Department of Fish and Wildlife, and Washington Water Trust in response to state regulations limiting new uses of water in the Dungeness Water Rule area. The bank helps to facilitate the protection of the Dungeness River while providing water for new uses such as homes and businesses.¹

The Skagit River Basin Mitigation Program, based on an environmentally friendly purchase of water rights at Seattle City Light, was announced at the end of March this year. It provides a limited amount of mitigation water to landowners with plots within an area designated as a mitigation zone, which is based on modeled interactions between groundwater and surface water from the Skagit River, where attenuating water is released by Seattle City Light. Water purchased from Seattle City Light will be used to offset the impacts on the Skagit River from certain new domestic uses of groundwater.

EVOLUTION OF PUBLIC SENTENCE AND PROPOSED LEGISLATION

Driven by concerns that water banks consolidate a public resource for private gain,² last year, the Washington state legislature considered legislation that would have fundamentally changed the state’s trust water regime.³ HB 1385 reportedly prohibited the downstream transfer of water rights in seven water resource inventory areas in eastern Washington. While this legislation was diluted in a study group, a feeling persists among some stakeholders that water supplies are potentially damaging.

Enter legislative session 2021, in which the final operating budget included several provisions related to water reserves. On the positive side, the budget includes $ 9,000,000 in Ecology credits “to administer [a] Pilot grant program for water storage strategies to meet the water needs described in this section.⁴ The needs identified by the legislature include agricultural use and flow reserved for fish and wildlife. The water bank must also preserve water use rights in the originating county and for permanent set-backs for fish and wildlife through the primary and secondary sections of the water right. Certain limitations apply to these grants, including, but not limited to, that grants (1) must be limited to $ 2,000,000 or less per applicant; (2) can only be used for the development of water banks in rural counties that have the headwaters of a major watershed within their borders and only for water bank strategies in the county of origin; (3) one-third of the water rights purchased with these funds must be permanently amended to become restricted flow rights benefiting fish and wildlife; (4) water banks should be intended to provide a local public interest; and (5) the applicant must be a public entity or a participant in a public / private partnership with a public entity.

The most delicate part of this package, at least as far as water reserves are concerned, is the financing of ecology for “[d]develop recommendations and implement actions under the existing authority to modify the water bank review process to ensure that key information is made available to the public.⁵ The bill asks Ecology to consider whether certain qualifying information should be required as part of a water bank application dossier. This information could potentially include an overview of the needs and customers that the bank will serve, the geographic area to be served, the mitigating rights available, changes to the mitigation rights, the limitations that the bank intends to address. impose and “anything else the department deems necessary to promote transparency and the public interest.” The budget also suggests that Ecology consider imposing reporting requirements on water banks when they implement changes in the customers or needs served by the water bank.

Ecology also needs to consider whether such changes should trigger a period of public comment. While any potential water bank would likely do their own due diligence in determining whether and where to market their water rights, the potential addition of these additional demand requirements creates another regulatory hurdle for water banks, as well as another burden for ecology to consider and approve.

Finally, the funding package includes an instruction for Ecology to “refine” its recommendations on improving the Washington framework for water banks, the water trust, and water rights transfers. The mandate also requires Ecology to address issues relating to private investment in water reserves and the merits of incentives and regulations relating to transfers of water rights outside the basin.⁶

POTENTIAL IMPACTS

Water banks have been a vital tool in reallocating a public resource as Washington’s economy evolves. Their usefulness lies at an interesting crossroads. On the one hand, they have agency staff dedicated to their assessment and facilitation, as well as well-established regulations and operating standards. On the other hand, partly because of their growing importance, they are at the center of a public debate about the highest and best use of a public natural resource.

Stakeholders are encouraged to follow this issue closely in order to understand and participate in the conversation and potential future legislation. Stakeholders should discuss with Ecology how best to tackle the implementation of the new grant funding requirements and new parameters for fund disbursement as well as the assessment of water markets in general.

Footnotes

¹ See About us, Dungeness Water Exchange.

² See Evan Bush, Wall Street Spends Millions To Buy Water In Washington State, THE SEATTLE TIMES (October 27, 2019, 6:00 a.m.).

³ See HB 1385 (2021-22), Limitation of water rights transfers outside their original water resources inventory area, available here.

⁴ Laws of 2021, c. 334, § 302 (32), available here.

⁵ Laws of 2021, c. 334, § 302 (31) (a).

⁶ Laws of 2021, c. 334, § 302 (31) (b).