1     
WATER RIGHTS - CHANGE APPLICATION REVISIONS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Jerry W. Stevenson

5     
House Sponsor: ____________

6     

7     LONG TITLE
8     General Description:
9          This bill modifies Title 73, Water and Irrigation, by amending the requirements for a
10     change application.
11     Highlighted Provisions:
12          This bill:
13          ▸     amends definitions;
14          ▸     modifies the procedure for filing a change application;
15          ▸     requires parties to mediate issues arising from a change application before
16     administrative review or litigation;
17          ▸     provides an option for court resolution of legal issues not within the purview of the
18     state engineer;
19          ▸     allows recovery of attorney fees under certain circumstances; and
20          ▸     makes technical changes.
21     Money Appropriated in this Bill:
22          None
23     Other Special Clauses:
24          None
25     Utah Code Sections Affected:
26     AMENDS:
27          73-1-4, as last amended by Laws of Utah 2013, Chapters 221 and 380
28          73-2-27, as enacted by Laws of Utah 2005, Chapter 215
29          73-3-3, as last amended by Laws of Utah 2012, Chapter 229
30          73-3-3.5, as last amended by Laws of Utah 2008, Chapter 3
31     

32     Be it enacted by the Legislature of the state of Utah:
33          Section 1. Section 73-1-4 is amended to read:
34          73-1-4. Reversion to the public by abandonment or forfeiture for nonuse within
35     seven years -- Nonuse application.
36          (1) As used in this section:
37          (a) "Public entity" means:
38          (i) the United States;
39          (ii) an agency of the United States;
40          (iii) the state;
41          (iv) a state agency;
42          (v) a political subdivision of the state; or
43          (vi) an agency of a political subdivision of the state.
44          (b) "Public water supplier" means an entity that:
45          (i) supplies water, directly or indirectly, to the public for municipal, domestic, or
46     industrial use; and
47          (ii) is:
48          (A) a public entity;
49          (B) a water corporation, as defined in Section 54-2-1, that is regulated by the Public
50     Service Commission;
51          (C) a community water system:
52          (I) that:
53          (Aa) supplies water to at least 100 service connections used by year-round residents; or
54          (Bb) regularly serves at least 200 year-round residents; and
55          (II) whose voting members:
56          (Aa) own a share in the community water system;
57          (Bb) receive water from the community water system in proportion to the member's
58     share in the community water system; and
59          (Cc) pay the rate set by the community water system based on the water the member
60     receives; or
61          (D) a water users association:
62          (I) in which one or more public entities own at least 70% of the outstanding shares; and
63          (II) that is a local sponsor of a water project constructed by the United States Bureau of
64     Reclamation.
65          (c) "Shareholder" [is as] means the same as that term is defined in Section 73-3-3.5.
66          (d) "Water company" [is as] means the same as that term is defined in Section
67     73-3-3.5.
68          (e) "Water supply entity" means an entity that supplies water as a utility service or for
69     irrigation purposes and is also:
70          (i) a municipality, water conservancy district, metropolitan water district, irrigation
71     district, or other public agency;
72          (ii) a water company regulated by the Public Service Commission; or
73          (iii) any other owner of a community water system.
74          (2) (a) Except as provided in Subsection (2)(b) or (e), when an appropriator or the
75     appropriator's successor in interest abandons or ceases to use all or a portion of a water right for
76     a period of seven years, the water right or the unused portion of that water right is subject to
77     forfeiture in accordance with Subsection (2)(c).
78          (b) (i) An appropriator or the appropriator's successor in interest may file an
79     application for nonuse with the state engineer.
80          (ii) If a person described in Subsection (2)(b)(i) files and receives approval on a nonuse
81     application, nonuse of the water right subject to the application is not counted toward a
82     seven-year period described in Subsection (2)(a) during the period of time beginning on the day
83     on which the person files the application and ending on the day on which the application
84     expires without being renewed.
85          (iii) If a person described in Subsection (2)(b)(i) files and receives approval on
86     successive, overlapping nonuse applications, nonuse of the water right subject to the
87     applications is not counted toward a seven-year period described in Subsection (2)(a) during
88     the period of time beginning on the day on which the person files the first application and
89     ending on the day on which the last application expires without being renewed.
90          (iv) Approval of a nonuse application does not protect a water right that is already
91     subject to forfeiture under Subsection (2)(a) for full or partial nonuse of the water right.
92          (v) A nonuse application may be filed on all or a portion of the water right, including
93     water rights held by a water company.
94          (vi) After giving written notice to the water company, a shareholder may file a nonuse
95     application with the state engineer on the water represented by the stock.
96          (c) (i) Except as provided in Subsection (2)(c)(ii), a water right or a portion of the water
97     right may not be forfeited unless a judicial action to declare the right forfeited is commenced
98     within 15 years from the end of the latest period of nonuse of at least seven years.
99          (ii) (A) The state engineer, in a proposed determination of rights prepared in
100     accordance with Section 73-4-11, may not assert that a water right was forfeited unless a period
101     of nonuse of seven years ends or occurs during the 15 years immediately preceding the day on
102     which the state engineer files the proposed determination of rights with the court.
103          (B) After the day on which a proposed determination of rights is filed with the court a
104     person may not assert that a water right subject to that determination was forfeited during the
105     15-year period described in Subsection (2)(c)(ii)(A), unless the state engineer asserts forfeiture
106     in the proposed determination, or a person makes, in accordance with Section 73-4-11, an
107     objection to the proposed determination that asserts forfeiture.
108          (iii) A water right, found to be valid in a decree entered in an action for general
109     determination of rights under Chapter 4, Determination of Water Rights, is subject to a claim
110     of forfeiture based on a seven-year period of nonuse that begins after the day on which the state
111     engineer filed the related proposed determination of rights with the court, unless the decree
112     provides otherwise.
113          (iv) If in a judicial action a court declares a water right forfeited, on the date on which
114     the water right is forfeited:
115          (A) the right to use the water reverts to the public; and
116          (B) the water made available by the forfeiture:
117          (I) first, satisfies other water rights in the hydrologic system in order of priority date;
118     and
119          (II) second, may be appropriated as provided in this title.
120          (d) [This] Except as provided in Subsection (2)(e), this section applies whether the
121     unused or abandoned water or a portion of the water is:
122          (i) permitted to run to waste; or
123          (ii) used by others without right with the knowledge of the water right holder.
124          (e) This section does not apply to:
125          (i) the use of water according to a lease or other agreement with the appropriator or the
126     appropriator's successor in interest;
127          (ii) a water right if its place of use is contracted under an approved state agreement or
128     federal conservation fallowing program;
129          [(iii) those periods of time when a surface water or groundwater source fails to yield
130     sufficient water to satisfy the water right;]
131          (iii) a water right during a period of time when a surface water source or groundwater
132     source fails to yield sufficient water to satisfy the water right;
133          (iv) a water right when water is unavailable because of the water right's priority date;
134          (v) a water right to store water in a surface reservoir or an aquifer, in accordance with
135     Title 73, Chapter 3b, Groundwater Recharge and Recovery Act, if:
136          (A) the water is stored for present or future use; or
137          (B) storage is limited by a safety, regulatory, or engineering restraint that the
138     appropriator or the appropriator's successor in interest cannot reasonably correct;
139          (vi) a water right if a water user has beneficially used substantially all of the water right
140     within a seven-year period, provided that this exemption does not apply to the adjudication of a
141     water right in a general determination of water rights under Chapter 4, Determination of Water
142     Rights;
143          (vii) except as provided by Subsection (2)(g), a water right:
144          (A) (I) owned by a public water supplier;
145          (II) represented by a public water supplier's ownership interest in a water company; or
146          (III) to which a public water supplier owns the right of use; and
147          (B) conserved or held for the reasonable future water requirement of the public, which
148     is determined according to Subsection (2)(f);
149          (viii) a supplemental water right during a period of time when another water right
150     available to the appropriator or the appropriator's successor in interest provides sufficient water
151     so as to not require use of the supplemental water right; or
152          (ix) a water right subject to an approved change application where the applicant is
153     diligently pursuing certification.
154          (f) (i) The reasonable future water requirement of the public is the amount of water
155     needed in the next 40 years by the persons within the public water supplier's [projected]
156     reasonably anticipated service area based on [projected] reasonably anticipated population
157     growth or other water use demand.
158          (ii) For purposes of Subsection (2)(f)(i), a community water system's [projected]
159     reasonably anticipated service area:
160          (A) is the area served by the community water system's distribution facilities; and
161          (B) expands as the community water system expands the distribution facilities in
162     accordance with Title 19, Chapter 4, Safe Drinking Water Act.
163          (g) For a water right acquired by a public water supplier on or after May 5, 2008,
164     Subsection (2)(e)(vii) applies if:
165          (i) the public water supplier submits a change application under Section 73-3-3; and
166          (ii) the state engineer approves the change application.
167          (3) (a) The state engineer shall furnish a nonuse application form requiring the
168     following information:
169          (i) the name and address of the applicant;
170          (ii) a description of the water right or a portion of the water right, including the point of
171     diversion, place of use, and priority;
172          (iii) the quantity of water;
173          (iv) the period of use;
174          (v) the extension of time applied for;
175          (vi) a statement of the reason for the nonuse of the water; and
176          (vii) any other information that the state engineer requires.
177          (b) (i) Upon receipt of the application, the state engineer shall publish a notice of the
178     application once a week for two successive weeks:
179          (A) in a newspaper of general circulation in the county in which the source of the water
180     supply is located and where the water is to be used; and
181          (B) as required in Section 45-1-101.
182          (ii) The notice shall:
183          (A) state that an application has been made; and
184          (B) specify where the interested party may obtain additional information relating to the
185     application.
186          (c) Any interested person may file a written protest with the state engineer against the
187     granting of the application:
188          (i) within 20 days after the notice is published, if the adjudicative proceeding is
189     informal; and
190          (ii) within 30 days after the notice is published, if the adjudicative proceeding is
191     formal.
192          (d) In any proceedings to determine whether the nonuse application should be
193     approved or rejected, the state engineer shall follow the procedures and requirements of Title
194     63G, Chapter 4, Administrative Procedures Act.
195          (e) After further investigation, the state engineer may approve or reject the application.
196          (4) (a) The state engineer shall grant a nonuse application on all or a portion of a water
197     right for a period of time not exceeding seven years if the applicant shows a reasonable cause
198     for nonuse.
199          (b) A reasonable cause for nonuse includes:
200          (i) a demonstrable financial hardship or economic depression;
201          (ii) physical causes or changes that render use beyond the reasonable control of the
202     water right owner;
203          [(ii)] (iii) the initiation of water conservation or efficiency practices, or the operation of
204     a groundwater recharge recovery program approved by the state engineer;
205          [(iii)] (iv) operation of legal proceedings;
206          [(iv)] (v) the holding of a water right or stock in a mutual water company without use
207     by any water supply entity to meet the reasonable future requirements of the public;
208          [(v)] (vi) situations where, in the opinion of the state engineer, the nonuse would assist
209     in implementing an existing, approved water management plan; or
210          [(vi)] (vii) the loss of capacity caused by deterioration of the water supply or delivery
211     equipment if the applicant submits, with the application, a specific plan to resume full use of
212     the water right by replacing, restoring, or improving the equipment.
213          (5) (a) Sixty days before the expiration of a nonuse application, the state engineer shall
214     notify the applicant by mail or by any form of electronic communication through which receipt
215     is verifiable, of the date when the nonuse application will expire.
216          (b) An applicant may file a subsequent nonuse application in accordance with this
217     section.
218          Section 2. Section 73-2-27 is amended to read:
219          73-2-27. Criminal penalties.
220          (1) This section applies to offenses committed under:
221          (a) Section 73-1-14;
222          (b) Section 73-1-15;
223          (c) Section 73-2-20;
224          (d) [Subsection] Section 73-3-3[(9)];
225          (e) Section 73-3-26;
226          (f) Section 73-3-29;
227          (g) Section 73-5-9;
228          (h) Section 76-10-201;
229          (i) Section 76-10-202; and
230          (j) Section 76-10-203.
231          (2) Under circumstances not amounting to an offense with a greater penalty under
232     Subsection 76-6-106(2)(b)(ii) or Section 76-6-404, violation of a provision listed in Subsection
233     (1) is punishable:
234          (a) as a felony of the third degree if:
235          (i) the value of the water diverted or property damaged or taken is $2,500 or greater;
236     and
237          (ii) the person violating the provision has previously been convicted of violating the
238     same provision;
239          (b) as a class A misdemeanor if:
240          (i) the value of the water diverted or property damaged or taken is $2,500 or greater; or
241          (ii) the person violating the provision has previously been convicted of violating the
242     same provision; or
243          (c) as a class B misdemeanor if Subsection (2)(a) or (b) does not apply.
244          Section 3. Section 73-3-3 is amended to read:
245          73-3-3. Permanent or temporary changes in point of diversion, place of use, or
246     purpose of use.
247          (1) For purposes of this section:
248          (a) "Permanent change" means a change for an indefinite period of time with an intent
249     to relinquish the original point of diversion, place of use, or purpose of use.
250          (b) "Temporary change" means a change for a fixed period of time not, exceeding one
251     year.
252          (2) (a) Subject to Subsection (2)(c), a person entitled to the use of water may make
253     permanent or temporary changes in the:
254          (i) point of diversion;
255          (ii) place of use; [or]
256          [(iii) purpose of use for which the water was originally appropriated.]
257          (iii) period of use;
258          (iv) nature of use; or
259          (v) addition or deletion of storage as an authorized use.
260          (b) Except as provided by Section 73-3-30, a change may not be made if it impairs a
261     vested water right without just compensation.
262          (c) A change application on a federal reclamation project water right shall be signed
263     by:
264          (i) the local water users organization that is contractually responsible for:
265          (A) the operation and maintenance of the project; or
266          (B) the repayment of project costs; and
267          (ii) the record title owner of the water right.
268          (3) A person entitled to use water shall change a point of diversion, place of use, or
269     purpose of water use, including water involved in a general adjudication or other suit, in the
270     manner provided in this section.
271          (4) (a) A person entitled to use water may not make a change unless the state engineer
272     approves the change application.
273          (b) A shareholder in a water company who seeks to make a permanent or temporary
274     change to a water right held in title by the water company shall file a change application in
275     accordance with Section 73-3-3.5.
276          [(b)] (5) A person entitled to use water shall submit a change application, upon forms
277     furnished by the state engineer [and shall set forth], that includes:
278          [(i)] (a) the change applicant's name;
279          [(ii)] (b) the water right description, including the water right number;
280          [(iii)] (c) the water quantity;
281          [(iv)] (d) the stream or water source;
282          [(v)] (e) if applicable, the point on the stream or water source where the water is
283     diverted;
284          [(vi)] (f) if applicable, the point to which it is proposed to change the diversion of the
285     water;
286          [(vii)] (g) the place, [purpose] nature, period, and extent of the [present] approved use;
287          [(viii)] (h) the place, [purpose] nature, period, and extent of the proposed use; [and]
288          (i) if the change applicant is submitting a change application in accordance with
289     Section 73-3-3.5, the information required by Section 73-3-3.5; and
290          [(ix)] (j) any other information that the state engineer requires.
291          [(5) (a) The state engineer shall follow the same procedures, and the rights and duties
292     of the applicants with respect to applications for permanent changes of point of diversion, place
293     of use, or purpose of use shall be the same, as provided in this title for applications to
294     appropriate water.]
295          (6) (a) With respect to a change application for a permanent change:
296          (i) the state engineer shall follow the same procedures provided in this title for
297     approving an application to appropriate water; and
298          (ii) the rights and duties of a change applicant are the same as the rights and duties of a
299     person who applies to appropriate water under this title.
300          (b) The state engineer may waive notice for a permanent change application involving
301     only a change in point of diversion of 660 feet or less.
302          [(6)] (7) (a) The state engineer shall investigate all temporary change applications.
303          (b) If the state engineer finds that the temporary change will not impair a vested water
304     right, the state engineer shall issue an order authorizing the change.
305          (c) If the state engineer finds that the change sought might impair a vested water right,
306     before authorizing the change, the state engineer shall give notice of the application to any
307     person whose right may be affected by the change.
308          (d) Before making an investigation or giving notice, the state engineer may require the
309     applicant to deposit a sum of money sufficient to pay the expenses of the investigation and
310     publication of notice.
311          [(7)] (8) (a) Except as provided by Section 73-3-30, the state engineer may not reject a
312     permanent or temporary change application for the sole reason that the change would impair a
313     vested water right.
314          (b) If otherwise proper, the state engineer may approve a permanent or temporary
315     change application for part of the water involved or upon the condition that the applicant
316     acquire the conflicting water right or otherwise mitigate the impairment.
317          [(8) (a) A person holding an approved application for the appropriation of water may
318     change the point of diversion, place of use, or purpose of use.]
319          [(b)] (9) A change of an approved application to appropriate water does not:
320          [(i)] (a) affect the priority of the original application to appropriate water; or
321          [(ii)] (b) extend the time period within which the construction of work is to begin or be
322     completed.
323          [(9)] (10) Any person who changes [or who attempts to change] a point of diversion,
324     place of use, or purpose of use, either permanently or temporarily, without first applying to the
325     state engineer in the manner provided in this section[: (a) obtains no right; (b)], is guilty of [a
326     crime] an offense punishable under Section 73-2-27 if the change [or attempted change] is
327     made knowingly or intentionally[; and].
328          [(c) is guilty of a separately punishable offense for each day of the unlawful change.]
329          (11) A person who makes a permanent or temporary change before obtaining an
330     approved change application under this section obtains no additional water right by the change
331     and shall comply with the change application process.
332          [(10)] (12) (a) This section does not apply to the replacement of an existing well by a
333     new well drilled within a radius of 150 feet from the point of diversion of the existing well.
334          (b) Any replacement well must be drilled in accordance with the requirements of
335     Section 73-3-28.
336          Section 4. Section 73-3-3.5 is amended to read:
337          73-3-3.5. Application for a change of point of diversion, place of use, or purpose
338     of use of water in a water company made by a shareholder.
339          (1) As used in this section:
340          (a) "Shareholder" means the owner of a share of stock, or other evidence of stock
341     ownership, that entitles the person to a proportionate share of water in a water company.
342          (b) "Water company" means, except as described in Subsection (1)(c), any company,
343     operating for profit or not for profit, [in which] where a shareholder has the right to receive a
344     proportionate share, based on that shareholder's ownership interest, of water delivered by the
345     company.
346          (c) "Water company" does not include a public water supplier, as defined in Section
347     73-1-4.
348          [(2) A shareholder who seeks to change the point of diversion, place of use, or purpose
349     of use of the shareholder's proportionate share of water in the water company shall submit a
350     request for the change, in writing, to the water company. This request shall include the
351     following information:]
352          [(a) the details of the requested change, which may include the point of diversion,
353     period of use, place, or nature of use;]
354          [(b) the quantity of water sought to be changed;]
355          (2) (a) A shareholder who seeks to file a change application under Section 73-3-3 to
356     make a change to some or all of the water represented by the shareholder's shares in a water
357     company shall submit a proposed change application to the water company before filing the
358     application with the state engineer.
359          (b) In addition to the information required under Section 73-3-3, the proposed change
360     application shall include:
361          [(c)] (i) the certificate number of the stock affected by the change;
362          [(d)] (ii) a description of the land proposed to be retired from irrigation [pursuant to] in
363     accordance with Section 73-3-3, if the proposed change in place or nature of use of the water
364     involves a situation where the water was previously used for irrigation;
365          [(e)] (iii) an agreement by the shareholder to continue to pay all applicable corporate
366     assessments on the share affected by the change; and
367          [(f)] (iv) any other information that the water company may reasonably need to
368     evaluate the [requested] proposed change application.
369          [(3) (a) A water company shall make a decision and provide written notice of that
370     decision on a shareholder's request for a change application within 120 days from receipt of the
371     request.]
372          [(b) Based on the facts and circumstances of each proposed change, a water company
373     may take the following action:]
374          [(i) approve the change request;]
375          [(ii) approve the change request with conditions; or]
376          [(iii) deny the change request.]
377          [(c) If the water company fails to respond to a shareholder's request for a change
378     application, pursuant to Subsection (3)(a), the failure to respond shall be considered to be a
379     denial of the request.]
380          [(d) The water company may not withhold approval if any potential damage, liability,
381     or impairment to the water company, or its shareholders, can be reasonably mitigated without
382     cost to the water company.]
383          [(e) A water company may consider the following factors in evaluating change
384     applications:]
385          (3) (a) The water company shall respond to the proposed change application described
386     in Subsection (2) within 90 days after the day on which the water company receives the
387     proposed change application.
388          (b) The water company's response to the proposed change application shall be in
389     writing and shall:
390          (i) consent to the proposed change;
391          (ii) consent to the proposed change, subject to certain conditions described by the water
392     company;
393          (iii) decline to consent to the proposed change, describing the reasons for declining to
394     consent; or
395          (iv) give notice that it elects to respond in a confidential communication for use in
396     mediation, as described in Subsection (8).
397          (c) In reviewing a shareholder's proposed change application, a water company may
398     consider:
399          (i) [any] whether an increased cost to the water company or its shareholders results
400     from the proposed change;
401          (ii) [interference] whether the proposed change will interfere with the water company's
402     ability to manage and distribute water for the benefit of all shareholders;
403          (iii) whether the proposed change represents more water than the shareholder's [pro
404     rata] proportionate share of the water company's right;
405          [(iv) impairment of either]
406          (iv) whether the proposed change would create preferential access to use of particular
407     company water rights to the detriment of other shareholders;
408          (v) whether the proposed change will impair the quantity or quality of water delivered
409     to other shareholders under the existing water rights of the water company, including rights to
410     carrier water;
411          [(v)] (vi) whether the proposed change [would cause a violation of any] violates a
412     statute, ordinance, regulation, or order of a court or [governmental] government agency; and
413          [(vi) whether the shareholder has or can arrange for the beneficial use of water to be
414     retired from irrigation within the water company's service under the proposed change; or]
415          [(vii)] (vii) the cumulative effects that the approval of the change application may have
416     on other shareholders or water company operations.
417          [(4) The water company may require that all costs associated with the change
418     application, including costs of submitting proof, be paid by the shareholder. (5) (a) The]
419          (4) (a) Within 60 days after the day on which the shareholder receives the water
420     company's response, or, if the water company fails to respond within 60 days after the last day
421     on which the water company may respond under Subsection (3)(a), the shareholder may
422     commence an administrative proceeding by filing the change application with the state
423     engineer in accordance with Section 73-3-3 and this section.
424          (b) The shareholder shall include as part of the change application filed with the state
425     engineer under Subsection (4)(a):
426          (i) the water company's response to the shareholder's proposed change application; or
427          (ii) an affidavit signed by the shareholder documenting the water company's failure to
428     respond in the time period described in Subsection (3)(a).
429          (5) If a shareholder files a change application and the water company has consented to
430     the proposed change under Subsection (3)(b)(i), or the water company has consented to the
431     proposed change subject to certain conditions under Subsection (3)(b)(ii) and the shareholder
432     agrees to the conditions, the state engineer shall proceed to evaluate the change application in
433     accordance with Subsection (13).
434          (6) If a shareholder files a change application and the water company has consented to
435     the proposed change subject to certain conditions under Subsection (3)(b)(ii) but the
436     shareholder disagrees with one or more conditions described in the response, or if the water
437     company declines to consent under Subsection (3)(b)(iii), or if the water company elects to
438     respond in a confidential communication as described in Subsection (3)(b)(iv), or if the water
439     company fails to respond and the shareholder submits an affidavit of nonresponse under
440     Subsection (4)(b)(ii), the state engineer shall:
441          (a) within 10 days after the day on which the state engineer receives the change
442     application, give notice to the shareholder and the water company that both parties are required
443     to engage in mediation before the state engineer will evaluate the change application; and
444          (b) provide written notice to the water company, if it failed to respond as required
445     under Subsection (3)(b), that the water company shall respond to the proposed change
446     application within 30 days after the day on which the water company receives the notice from
447     the state engineer and that the response shall conform with one of the options described in
448     Subsection (3)(b).
449          (7) If the water company has not previously responded under Subsection (3)(b) and
450     fails to respond to the notice under Subsection (6)(b), the state engineer may proceed with the
451     administrative evaluation under Subsection (13).
452          (8) (a) If the water company has, in writing, declined to consent to the change
453     application under Subsection (3)(b)(iii) or Subsection (6)(b), has consented on conditions
454     unacceptable to the shareholder, or has elected to respond in a confidential communication as
455     described in Subsection (3)(b)(iv), the parties shall jointly retain the service of a mediator and
456     schedule a mediation on the change application filed by the shareholder and the response of the
457     water company.
458          (b) If the shareholder and water company are unable to agree upon a mediator, the
459     Office of the Property Rights Ombudsman shall serve in the capacity of mediator.
460          (c) The shareholder and water company shall equally share the costs related to the use
461     of the mediator for a mediation conducted under Subsection (8)(a).
462          (d) The mediation described in Subsection (8)(a) shall be held within 60 days of the
463     day on which the state engineer gives the notice set forth in Subsection (6)(a) if the water
464     company issued a written response pursuant to Subsection (3)(a), or within 60 days of the day
465     on which the water company issues a written response pursuant to Subsection (6)(b).
466          (e) If the water company elected to respond in a confidential communication as
467     described in Subsection (3)(b)(iv), the water company shall provide the shareholder and the
468     mediator a confidential statement of the reasons supporting any conditions on which its consent
469     is based, or on which its decision to decline to consent is based, no less than 21 days before the
470     day on which mediation is scheduled to occur.
471          (f) The shareholder and the mediator shall keep confidential any information in the
472     statement described in Subsection (8)(e) identified as confidential.
473          (g) The time for completion of the mediation may be extended for up to 90 days if the
474     parties agree and send written notice to the state engineer.
475          (h) If the water company gave written notice under Subsection (3)(b)(iv) of its election
476     to respond to the shareholder's change application in a confidential communication before
477     mediation, but then failed to respond as required in Subsection (8)(e) within the time specified
478     or the time allowed under any agreed extension, the water company shall be considered to have
479     consented to the change application.
480          (i) Within five days after the day on which the final day of mediation occurs, the
481     mediator shall send a written statement to the state engineer, with a copy provided to each
482     party, advising whether the mediation resulted in an agreement between the parties.
483          (9) If a shareholder and a water company come to an agreement in a mediation
484     conducted under Subsection (8), the state engineer shall proceed to evaluate the change
485     application in accordance with Subsection (13).
486          (10) If the parties do not reach an agreement through mediation and a mediator's
487     statement, as described in Subsection (8)(i), is not received within 10 days following the time
488     allowed for mediation, either party may send written notice to the other and to the state
489     engineer that the parties are not in agreement regarding the proposed change application.
490          (11) Within 60 days of the day on which the state engineer receives the written
491     statement from the mediator under Subsection (8)(i), or the written notice from a party under
492     Subsection (10), that the parties are not in agreement regarding the proposed change
493     application, the shareholder or the water company may file an action in district court to resolve
494     legal issues not within the purview of the state engineer's evaluation under Subsection (13).
495          (12) If a court action is not timely filed under Subsection (11), or if an action is timely
496     filed and subsequently resolved and the matter remanded to the state engineer, the state
497     engineer shall move forward with the administrative proceeding under Subsection (13).
498          (13) (a) The state engineer shall evaluate a shareholder's change application in the same
499     manner used to evaluate a change application submitted under Section 73-3-3, using:
500          (i) the criteria described in Section 73-3-8;
501          (ii) the considerations described in Subsection (3)(c), related specifically to shareholder
502     applications; and
503          (iii) the water company's conditions in consenting to the shareholder's proposed change
504     application.
505          (b) Nothing in this section limits the authority of the state engineer in evaluating and
506     processing a change application, including the authority to require or allow a shareholder or
507     water company to submit additional relevant information, if the state engineer finds an absence
508     of prejudice and allows adequate time and opportunity for the other party to respond.
509          (c) The state engineer may not withhold approval of a change application under this
510     section based on potential damage, liability, or impairment to the water company or its
511     shareholders if the potential damage, liability, or impairment can be reasonably mitigated
512     without cost to the water company.
513          (14) If the state engineer approves a shareholder's change application, the state
514     engineer may:
515          (a) condition approval on payment of the water company's reasonable costs incurred in
516     the transfer process and in making adjustments to the water company's diversion or delivery
517     system that are necessitated by the approved change application; and
518          (b) for shares included in the approval, require that the shareholder requesting the
519     change [must] be current on all water company assessments and [agree to]:
520          (i) continue to pay all reasonably applicable future assessments[, except that the
521     shareholder may choose to prepay any portion of the water company assessments attributable to
522     an existing debt of the water company.], with credit given to the shareholder for cost savings to
523     the company; or
524          [(b) Other than prepaid assessments, the water company may require that the
525     shareholder continue to pay all applicable assessments.]
526          [(6) If the water company approves the requested change, with or without conditions,
527     the change application may be filed with the state engineer, and must:]
528          [(a) be signed on behalf of the water company; or]
529          [(b) be accompanied by written authorization from the water company assenting to the
530     change.]
531          [(7) (a) The state engineer may evaluate a change application authorized by a water
532     company under this section in the same manner and using the same criteria that he or she uses
533     to evaluate any other change application.]
534          [(b) Nothing in this section shall limit the authority of the state engineer in evaluating
535     and processing any change application.]
536          [(8) If an application authorized by a water company under this section is approved by
537     the state engineer, the shareholder may file requests for extensions of time to submit proof of
538     beneficial use under the change application without further permission of the water company.]
539          [(9) (a) Change applications approved under this section are subject to all conditions
540     imposed by the water company and the state engineer.]
541          [(b) If a shareholder fails to comply with all of the conditions imposed by the water
542     company, the water company may, after written notice to the shareholder and after allowing
543     reasonable time to remedy the failure, withdraw its approval of the application, and petition the
544     state engineer for an order canceling the change application.]
545          [(c) The water company may not revoke its approval of the change application or seek
546     an order canceling the application if the conditions are substantially satisfied.]
547          [(10) (a) The shareholder requesting the change shall have a cause of action, including
548     an award of actual damages incurred, against the water company if the water company:]
549          [(i) unreasonably withholds approval of a requested change;]
550          [(ii) imposes unreasonable conditions in its approval; or]
551          [(iii) withdraws approval of a change application in a manner other than as provided in
552     Subsection (9).]
553          [(b) The action referred to in Subsection (10)(a) shall be referred to mediation by the
554     court under Title 78B, Chapter 6, Part 2, Alternative Dispute Resolution Act, unless both
555     parties decline mediation.]
556          [(c) If mediation is declined, the prevailing party to the action shall be entitled to costs
557     and reasonable attorney fees.]
558          (ii) by mutual agreement only, and when the shares will rely upon a different diversion
559     and delivery system, negotiate a buyout that includes a pro rata share of the bonded
560     indebtedness assignable to the shares, together with the capitalized value of anticipated future
561     assessments for maintenance and operation that otherwise would have applied.
562          (15) A shareholder or a water company may obtain de novo judicial review of the state
563     engineer's determination under Subsections (13) and (14) by filing an action in district court
564     within 30 days after the day on which the state engineer makes a final determination in the
565     adjudicative proceeding on the change application.
566          (16) If, after a proposed change has been approved and gone into effect, a shareholder
567     fails to substantially comply with a condition described in Subsection (14)(a) or (b) and
568     neglects to remedy the failure after written notice from the water company that allows the
569     shareholder a reasonable opportunity to remedy the failure, that is not less than 90 days after
570     the day on which the water company gives notice, the water company may:
571          (a) petition the state engineer to order a reversal of the change application approval; or
572          (b) proceed under the remedies provided in Title 16, Chapter 4, Share Assessment Act.
573          (17) If a shareholder's change application is denied by the state engineer and the denial
574     is upheld by the district court in a de novo action, the district court may award costs and
575     reasonable attorney fees to the water company if the court finds that:
576          (a) the shareholder refused to accept conditions advanced by the water company for the
577     water company to consent to the proposed change; and
578          (b) the conditions advanced by the water company for consenting to the shareholder's
579     change were reasonable and necessary to protect the other shareholders.
580          (18) If a shareholder's change application is approved by the state engineer and upheld
581     by a district court in a de novo action, the district court may award costs and reasonable
582     attorney fees to the shareholder if the district court finds that the water company:
583          (a) unreasonably declined to consent to the proposed change; or
584          (b) conditioned its consent to the proposed change on unreasonable requirements.




Legislative Review Note
     as of 1-23-15 9:43 AM

Office of Legislative Research and General Counsel