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Second Substitute S.B. 99

Senator John L. Valentine proposes the following substitute bill:





Chief Sponsor: John L. Valentine

House Sponsor: ____________

             8      LONG TITLE
             9      General Description:
             10          This bill addresses the process for changing water rights.
             11      Highlighted Provisions:
             12          This bill:
             13          .    addresses the filing of a change application, including:
             14              .    treatment of a change application by a shareholder in a water company; and
             15              .    the state engineer's evaluation of a change application;
             16          .    provides restrictions on a water company's denial of a shareholder's change request;
             17          .    allows a water company to require a shareholder to pay certain water company costs
             18      in connection with the shareholder's change request;
             19          .    prohibits a water company from requiring a shareholder, as part of the share
             20      assessment process, to pay a proportionate share of the costs of an action concerning
             21      the shareholder's change request; and
             22          .    makes technical changes.
             23      Monies Appropriated in this Bill:
             24          None
             25      Other Special Clauses:

             26          None
             27      Utah Code Sections Affected:
             28      AMENDS:
             29          73-3-3, as last amended by Laws of Utah 2008, Chapter 311
             30          73-3-3.5, as last amended by Laws of Utah 2008, Chapter 3
             32      Be it enacted by the Legislature of the state of Utah:
             33          Section 1. Section 73-3-3 is amended to read:
             34           73-3-3. Permanent or temporary changes in point of diversion, place of use, or
             35      purpose of use.
             36          (1) For purposes of this section:
             37          (a) "Permanent change" means a change for an indefinite period of time with an intent
             38      to relinquish the original point of diversion, place of use, or purpose of use.
             39          (b) "Temporary change" means a change for a fixed period of time not exceeding one
             40      year.
             41          (2) (a) Any person entitled to the use of water, or a shareholder of a water company
             42      with the written consent of the corporation given in accordance with Section 73-3-3.5 , may
             43      make permanent or temporary changes in the:
             44          (i) point of diversion;
             45          (ii) place of use; or
             46          (iii) purpose of use for which the water was originally appropriated.
             47          (b) Except as provided by Section 73-3-30 , a change may not be made if it impairs a
             48      vested water right without just compensation.
             49          (3) A person entitled to use water, or a shareholder of a water company with the written
             50      consent of the corporation given in accordance with Section 73-3-3.5 , shall change a point of
             51      diversion, place of use, or purpose of water use, including water involved in a general
             52      adjudication or other suit, in the manner provided in this section.
             53          (4) (a) [A person entitled to use water may not make a change] A change in the use of
             54      water may not be made unless the state engineer approves the change application.
             55          (b) A person entitled to use water, or a shareholder of a water company with the written
             56      consent of the corporation given in accordance with Section 73-3-3.5 , shall submit a change

             57      application upon forms furnished by the state engineer and shall set forth:
             58          (i) the applicant's name;
             59          (ii) the water right description;
             60          (iii) the water quantity;
             61          (iv) the stream or water source;
             62          (v) if applicable, the point on the stream or water source where the water is diverted;
             63          (vi) if applicable, the point to which it is proposed to change the diversion of the water;
             64          (vii) the place, purpose, and extent of the present use;
             65          (viii) the place, purpose, and extent of the proposed use; and
             66          (ix) any other information that the state engineer requires.
             67          (5) (a) The state engineer shall follow the same procedures, and the rights and duties of
             68      the applicants with respect to applications for permanent changes of point of diversion, place of
             69      use, or purpose of use shall be the same, as provided in this title for applications to appropriate
             70      water.
             71          (b) The state engineer may waive notice for a permanent change application involving
             72      only a change in point of diversion of 660 feet or less.
             73          (6) (a) The state engineer shall investigate all temporary change applications.
             74          (b) If the state engineer finds that the temporary change will not impair a vested water
             75      right, the state engineer shall issue an order authorizing the change.
             76          (c) If the state engineer finds that the change sought might impair a vested water right,
             77      before authorizing the change, the state engineer shall give notice of the application to any
             78      person whose right may be affected by the change.
             79          (d) Before making an investigation or giving notice, the state engineer may require the
             80      applicant to deposit a sum of money sufficient to pay the expenses of the investigation and
             81      publication of notice.
             82          (7) (a) Except as provided by Section 73-3-30 , the state engineer may not reject a
             83      permanent or temporary change application for the sole reason that the change would impair a
             84      vested water right.
             85          (b) If otherwise proper, the state engineer may approve a permanent or temporary
             86      change application for part of the water involved or upon the condition that the applicant
             87      acquire the conflicting water right.

             88          (8) (a) A person holding an approved application for the appropriation of water may
             89      change the point of diversion, place of use, or purpose of use.
             90          (b) A change of an approved application does not:
             91          (i) affect the priority of the original application; or
             92          (ii) extend the time period within which the construction of work is to begin or be
             93      completed.
             94          (9) Any person who changes or who attempts to change a point of diversion, place of
             95      use, or purpose of use, either permanently or temporarily, without first applying to the state
             96      engineer in the manner provided in this section:
             97          (a) obtains no right;
             98          (b) is guilty of a crime punishable under Section 73-2-27 if the change or attempted
             99      change is made knowingly or intentionally; and
             100          (c) is guilty of a separately punishable offense for each day of the unlawful change.
             101          (10) (a) This section does not apply to the replacement of an existing well by a new
             102      well drilled within a radius of 150 feet from the point of diversion of the existing well.
             103          (b) Any replacement well must be drilled in accordance with the requirements of
             104      Section 73-3-28 .
             105          Section 2. Section 73-3-3.5 is amended to read:
             106           73-3-3.5. Application for a change of point of diversion, place of use, or purpose
             107      of use of water in a water company made by a shareholder.
             108          (1) As used in this section and Section 73-3-3 :
             109          (a) "Shareholder" means the owner of a share of stock, or other evidence of stock
             110      ownership, that entitles the [person] owner to a proportionate share of water in a water
             111      company.
             112          (b) "Water company" means any company, operating for profit or not for profit, in
             113      which a shareholder has the right to receive a proportionate share, based on that shareholder's
             114      ownership interest, of water delivered by the company.
             115          (2) A shareholder who seeks to change the point of diversion, place of use, or purpose
             116      of use of the shareholder's proportionate share of water in the water company shall submit a
             117      request for the change, in writing, to the water company. This request shall include the
             118      following information:

             119          (a) the details of the requested change, which may include the point of diversion,
             120      period of use, place, or nature of use;
             121          (b) the quantity of water sought to be changed;
             122          (c) the certificate number of the stock affected by the change;
             123          (d) a description of the land proposed to be retired from irrigation pursuant to Section
             124      73-3-3 , if the proposed change in place or nature of use of the water involves a situation where
             125      the water was previously used for irrigation;
             126          (e) an agreement by the shareholder to continue to pay all applicable corporate
             127      assessments on the share affected by the change; and
             128          (f) any other information that the water company may reasonably need to evaluate the
             129      requested change application.
             130          (3) (a) A water company shall make a decision and provide written notice of that
             131      decision on a shareholder's request for a change application within 120 days from receipt of the
             132      request.
             133          (b) Based on the facts and circumstances of each proposed change, a water company
             134      may take the following action:
             135          (i) approve the change request;
             136          (ii) approve the change request with conditions; or
             137          (iii) deny the change request.
             138          (c) If the water company fails to respond to a shareholder's request for a change
             139      application, pursuant to Subsection (3)(a), the failure to respond shall be considered to be a
             140      denial of the request.
             141          [(d) The water company may not withhold approval if any potential damage, liability,
             142      or impairment to the water company, or its shareholders, can be reasonably mitigated without
             143      cost to the water company.]
             144          (d) The water company shall approve the change request, including a change that if
             145      made would result in changing the place of use to a location outside of the historic service area
             146      of the water company, unless the water company reasonably believes that:
             147          (i) the proposed use would be contrary to a restriction in an exchange or other
             148      contractual agreement between the water company and:
             149          (A) another water company;

             150          (B) a political subdivision of the state; or
             151          (C) the federal government;
             152          (ii) the proposed use could adversely affect the status of a water company as a public
             153      water supplier, as defined in Section 73-1-4 ; or
             154          (iii) any potential damage, liability, or impairment to the water company or its
             155      shareholders cannot be mitigated:
             156          (A) by the imposition of reasonable conditions on the approval of the change request;
             157      and
             158          (B) without cost to the water company.
             159          (e) A water company may consider the following factors in evaluating change
             160      applications:
             161          (i) any increased cost to the water company or its shareholders;
             162          (ii) interference with the water company's ability to manage and distribute water for the
             163      benefit of all shareholders;
             164          (iii) whether the proposed change represents more water than the shareholder's pro rata
             165      share of the water company's right;
             166          (iv) impairment of either the quantity or quality of water delivered to other
             167      shareholders under the existing water rights of the water company, including rights to carrier
             168      water;
             169          (v) whether the proposed change would cause a violation of any statute, ordinance,
             170      regulation, or order of a court or governmental agency;
             171          (vi) whether the shareholder has or can arrange for the beneficial use of water to be
             172      retired from irrigation within the water company's service area under the proposed change; or
             173          (vii) the cumulative effects that the approval of the change application may have on
             174      other shareholders or water company operations.
             175          [(4) The water company may require that all costs associated with the change
             176      application, including costs of submitting proof, be paid by the shareholder.]
             177          (4) (a) The water company may require the shareholder to pay the following costs
             178      incurred in the water company's review of the requested change, the state engineer's review of
             179      the change application, and judicial review of the state engineer's order:
             180          (i) filing fees;

             181          (ii) necessary professional fees incurred by the water company; and
             182          (iii) other costs associated with the state engineer's consideration of the change
             183      application.
             184          (b) The water company may require the shareholder to pay the costs of submitting
             185      proof of the change.
             186          (c) The water company shall provide the shareholder with:
             187          (i) an accounting of fees or costs under this Subsection (4); and
             188          (ii) copies of any invoices for fees or costs under this Subsection (4).
             189          (5) (a) The shareholder requesting the change must be current on all water company
             190      assessments and agree to continue to pay all applicable future assessments, except that the
             191      shareholder may choose to prepay any portion of the water company assessments attributable to
             192      an existing debt of the water company.
             193          (b) Other than prepaid assessments, the water company may require that the
             194      shareholder continue to pay all applicable assessments.
             195          (6) If the water company approves the requested change, with or without conditions,
             196      the change application [may] shall be filed with the state engineer, and must:
             197          (a) be signed on behalf of the water company; or
             198          (b) be signed by the requesting shareholder, accompanied by written authorization from
             199      the water company assenting to the change and the filing of the application by the shareholder
             200      for the shareholder and on the water company's behalf.
             201          (7) (a) [The] Subject to the other provisions of this Subsection (7), the state engineer
             202      may evaluate a change application authorized by a water company under this section in the
             203      same manner and using the same criteria that [he or she uses] is used to evaluate any other
             204      change application.
             205          (b) As part of an evaluation under Subsection 73-3-8 (1)(a)(ii) and (iii), the state
             206      engineer may consider whether a proposed change of use will adversely affect:
             207          (i) the local public welfare, including the affairs of the persons residing in the area
             208      where the water has historically been used;
             209          (ii) the local public welfare in the area where the water would be transferred, including
             210      the affairs of the persons residing in the area directly affected by the proposed use; or
             211          (iii) whether the proposed change may preclude a more beneficial use of the water that

             212      is of greater benefit to the public welfare of the citizens of this state.
             213          (c) If the state engineer concludes the proposed change in a change application is
             214      detrimental to the public welfare in accordance with Subsection (7)(b), the state engineer may:
             215          (i) reject the change application;
             216          (ii) approve the change application for a lesser quantity of water; or
             217          (iii) approve the change application with conditions designed to protect the public
             218      welfare.
             219          [(b)] (d) Nothing in this section [shall limit] limits the authority of the state engineer in
             220      evaluating and processing any change application.
             221          (8) If an application authorized by a water company under this section is approved by
             222      the state engineer, the shareholder may file requests for extensions of time to submit proof of
             223      beneficial use under the change application without further permission of the water company.
             224          (9) (a) Change applications approved under this section are subject to all conditions
             225      imposed by the water company and the state engineer.
             226          (b) If a shareholder fails to comply with all of the conditions imposed by the water
             227      company, the water company may, after written notice to the shareholder and after allowing
             228      reasonable time to remedy the failure, withdraw its approval of the application, and petition the
             229      state engineer for an order canceling the change application.
             230          (c) The water company may not revoke its approval of the change application or seek
             231      an order canceling the application if the conditions are substantially satisfied.
             232          (10) (a) The shareholder requesting the change shall have a cause of action, including
             233      an award of actual damages incurred, against the water company if the water company
             234      unreasonably:
             235          (i) [unreasonably withholds] denies approval of a requested change;
             236          (ii) imposes [unreasonable] conditions in its approval; or
             237          (iii) withdraws approval of a change application in a manner other than as provided in
             238      Subsection (9).
             239          (b) The action referred to in Subsection (10)(a) shall be referred to mediation by the
             240      court under Title 78B, Chapter 6, Part 2, Alternative Dispute Resolution Act, unless both
             241      parties decline mediation.
             242          (c) If mediation is declined, the prevailing party to the action shall be entitled to costs

             243      and reasonable attorney fees.
             244          (d) Notwithstanding Title 16, Chapter 4, Share Assessment Act, a shareholder who
             245      prevails in an action under this Subsection (10) may not be assessed by the water company for
             246      payment of a proportionate share of:
             247          (i) the water company's attorney fees and other costs incurred in the action; or
             248          (ii) an award of actual damages the water company is required to pay the prevailing
             249      shareholder.

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