1     
WATER BANKING AMENDMENTS

2     
2020 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Jani Iwamoto

5     
House Sponsor: Timothy D. Hawkes

6     Cosponsors:
7     David P. Hinkins
Ralph Okerlund


8     

9     LONG TITLE
10     General Description:
11          This bill addresses transactional water right banking.
12     Highlighted Provisions:
13          This bill:
14          ▸     authorizes the Board of Water Resources, the state engineer, and the Division of
15     Water Resources to implement water banking;
16          ▸     enacts the Water Banking Act, including:
17               •     defining terms;
18               •     outlining the objectives of a water right banking system;
19               •     providing the scope of the chapter;
20               •     addressing assistance by the Division of Water Resources;
21               •     addressing fees;
22               •     outlining how statutory water banks are established and amended;
23               •     outlining how contract water banks are established and amended;
24               •     requiring annual reports to the Board of Water Resources;
25               •     addressing default of a water bank and revocation of a water bank;
26               •     providing for the banking of water rights;
27               •     addressing condemnation of banked water rights;
28               •     addressing delivery request for loaned water rights in water banks;

29               •     addressing the enforcement powers of the state engineer; and
30               •     imposing reporting procedures on the board and the Department of Natural
31     Resources;
32          ▸     provides for a repeal date of the water banking provisions;
33          ▸     specifies that water rights deposited in a water bank are not subject to abandonment
34     or forfeiture while approved for use in a water bank; and
35          ▸     makes technical and conforming amendments.
36     Money Appropriated in this Bill:
37          None
38     Other Special Clauses:
39          None
40     Utah Code Sections Affected:
41     AMENDS:
42          63I-1-273, as last amended by Laws of Utah 2019, Chapters 96 and 246
43          73-1-4, as last amended by Laws of Utah 2017, Chapter 132
44          73-10-4, as last amended by Laws of Utah 1969, Chapter 198
45     ENACTS:
46          73-31-101, Utah Code Annotated 1953
47          73-31-102, Utah Code Annotated 1953
48          73-31-103, Utah Code Annotated 1953
49          73-31-104, Utah Code Annotated 1953
50          73-31-105, Utah Code Annotated 1953
51          73-31-106, Utah Code Annotated 1953
52          73-31-107, Utah Code Annotated 1953
53          73-31-201, Utah Code Annotated 1953
54          73-31-202, Utah Code Annotated 1953
55          73-31-203, Utah Code Annotated 1953
56          73-31-204, Utah Code Annotated 1953

57          73-31-205, Utah Code Annotated 1953
58          73-31-206, Utah Code Annotated 1953
59          73-31-301, Utah Code Annotated 1953
60          73-31-302, Utah Code Annotated 1953
61          73-31-303, Utah Code Annotated 1953
62          73-31-304, Utah Code Annotated 1953
63          73-31-305, Utah Code Annotated 1953
64          73-31-401, Utah Code Annotated 1953
65          73-31-402, Utah Code Annotated 1953
66          73-31-501, Utah Code Annotated 1953
67          73-31-502, Utah Code Annotated 1953
68          73-31-503, Utah Code Annotated 1953
69          73-31-601, Utah Code Annotated 1953
70     

71     Be it enacted by the Legislature of the state of Utah:
72          Section 1. Section 63I-1-273 is amended to read:
73          63I-1-273. Repeal dates, Title 73.
74          (1) In relation to the Legislative Water Development Commission, on January 1, 2021:
75          [(1)] (a) in Subsection 73-10g-105(3), the language that states "and in consultation
76     with the State Water Development Commission created in Section 73-27-102" is repealed;
77          [(2)] (b) Subsection 73-10g-203(4)(a) is repealed; and
78          [(3)] (c) Title 73, Chapter 27, State Water Development Commission, is repealed.
79          (2) In relation to Title 73, Chapter 31, Water Banking Act, on December 31, 2030:
80          (a) Subsection 73-1-4(2)(e)(x) is repealed;
81          (b) Subsection 73-10-4(1)(h) is repealed; and
82          (c) Title 73, Chapter 31, Water Banking Act, is repealed.
83          Section 2. Section 73-1-4 is amended to read:
84          73-1-4. Reversion to the public by abandonment or forfeiture for nonuse within

85     seven years -- Nonuse application.
86          (1) As used in this section:
87          (a) "Public entity" means:
88          (i) the United States;
89          (ii) an agency of the United States;
90          (iii) the state;
91          (iv) a state agency;
92          (v) a political subdivision of the state; or
93          (vi) an agency of a political subdivision of the state.
94          (b) "Public water supplier" means an entity that:
95          (i) supplies water, directly or indirectly, to the public for municipal, domestic, or
96     industrial use; and
97          (ii) is:
98          (A) a public entity;
99          (B) a water corporation, as defined in Section 54-2-1, that is regulated by the Public
100     Service Commission;
101          (C) a community water system:
102          (I) that:
103          (Aa) supplies water to at least 100 service connections used by year-round residents; or
104          (Bb) regularly serves at least 200 year-round residents; and
105          (II) whose voting members:
106          (Aa) own a share in the community water system;
107          (Bb) receive water from the community water system in proportion to the member's
108     share in the community water system; and
109          (Cc) pay the rate set by the community water system based on the water the member
110     receives; or
111          (D) a water users association:
112          (I) in which one or more public entities own at least 70% of the outstanding shares; and

113          (II) that is a local sponsor of a water project constructed by the United States Bureau of
114     Reclamation.
115          (c) "Shareholder" means the same as that term is defined in Section 73-3-3.5.
116          (d) "Water company" means the same as that term is defined in Section 73-3-3.5.
117          (e) "Water supply entity" means an entity that supplies water as a utility service or for
118     irrigation purposes and is also:
119          (i) a municipality, water conservancy district, metropolitan water district, irrigation
120     district, or other public agency;
121          (ii) a water company regulated by the Public Service Commission; or
122          (iii) any other owner of a community water system.
123          (2) (a) Except as provided in Subsection (2)(b) or (e), when an appropriator or the
124     appropriator's successor in interest abandons or ceases to beneficially use all or a portion of a
125     water right for a period of at least seven years, the water right or the unused portion of that
126     water right is subject to forfeiture in accordance with Subsection (2)(c).
127          (b) (i) An appropriator or the appropriator's successor in interest may file an
128     application for nonuse with the state engineer.
129          (ii) A nonuse application may be filed on all or a portion of the water right, including
130     water rights held by a water company.
131          (iii) After giving written notice to the water company, a shareholder may file a nonuse
132     application with the state engineer on the water represented by the stock.
133          (iv) (A) The approval of a nonuse application excuses the requirement of beneficial use
134     of water from the date of filing.
135          (B) The time during which an approved nonuse application is in effect does not count
136     toward the seven-year period described in Subsection (2)(a).
137          (v) The filing or approval of a nonuse application or a series of nonuse applications
138     under Subsection (3) does not:
139          (A) constitute beneficial use of a water right;
140          (B) protect a water right that is already subject to forfeiture under this section; or

141          (C) bar a water right owner from:
142          (I) using the water under the water right as permitted under the water right; or
143          (II) claiming the benefit of Subsection (2)(e) or any other forfeiture defense provided
144     by law.
145          (c) (i) Except as provided in Subsection (2)(c)(ii), a water right or a portion of the
146     water right may not be forfeited unless a judicial action to declare the right forfeited is
147     commenced:
148          (A) within 15 years from the end of the latest period of nonuse of at least seven years;
149     or
150          (B) within the combined time of 15 years from the end of the most recent period of
151     nonuse of at least seven years and the time the water right was subject to one or more nonuse
152     applications.
153          (ii) (A) The state engineer, in a proposed determination of rights filed with the court
154     and prepared in accordance with Section 73-4-11, may not assert that a water right was
155     forfeited unless the most recent period of nonuse of seven years ends or occurs:
156          (I) during the 15 years immediately preceding the day on which the state engineer files
157     the proposed determination of rights with the court; or
158          (II) during the combined time immediately preceding the day on which the state
159     engineer files the proposed determination of rights consisting of 15 years and the time the
160     water right was subject to one or more approved nonuse applications.
161          (B) After the day on which a proposed determination of rights is filed with the court a
162     person may not assert that a water right subject to that determination was forfeited before the
163     issuance of the proposed determination, unless the state engineer asserts forfeiture in the
164     proposed determination, or a person, in accordance with Section 73-4-11, makes an objection
165     to the proposed determination that asserts forfeiture.
166          (iii) A water right, found to be valid in a decree entered in an action for general
167     determination of rights under Chapter 4, Determination of Water Rights, is subject to a claim
168     of forfeiture based on a seven-year period of nonuse that begins after the day on which the state

169     engineer filed the related proposed determination of rights with the court, unless the decree
170     provides otherwise.
171          (iv) If in a judicial action a court declares a water right forfeited, on the date on which
172     the water right is forfeited:
173          (A) the right to beneficially use the water reverts to the public; and
174          (B) the water made available by the forfeiture:
175          (I) first, satisfies other water rights in the hydrologic system in order of priority date;
176     and
177          (II) second, may be appropriated as provided in this title.
178          (d) Except as provided in Subsection (2)(e), this section applies whether the unused or
179     abandoned water or a portion of the water is:
180          (i) permitted to run to waste; or
181          (ii) beneficially used by others without right with the knowledge of the water right
182     holder.
183          (e) This section does not apply to:
184          (i) the beneficial use of water according to a lease or other agreement with the
185     appropriator or the appropriator's successor in interest;
186          (ii) a water right if its place of use is contracted under an approved state agreement or
187     federal conservation fallowing program;
188          (iii) those periods of time when a surface water or groundwater source fails to yield
189     sufficient water to satisfy the water right;
190          (iv) a water right when water is unavailable because of the water right's priority date;
191          (v) a water right to store water in a surface reservoir or an aquifer, in accordance with
192     Title 73, Chapter 3b, Groundwater Recharge and Recovery Act, if:
193          (A) the water is stored for present or future beneficial use; or
194          (B) storage is limited by a safety, regulatory, or engineering restraint that the
195     appropriator or the appropriator's successor in interest cannot reasonably correct;
196          (vi) a water right if a water user has beneficially used substantially all of the water right

197     within a seven-year period, provided that this exemption does not apply to the adjudication of a
198     water right in a general determination of water rights under Chapter 4, Determination of Water
199     Rights;
200          (vii) except as provided by Subsection (2)(g), a water right:
201          (A) (I) owned by a public water supplier;
202          (II) represented by a public water supplier's ownership interest in a water company; or
203          (III) to which a public water supplier owns the right of beneficial use; and
204          (B) conserved or held for the reasonable future water requirement of the public, which
205     is determined according to Subsection (2)(f);
206          (viii) a supplemental water right during a period of time when another water right
207     available to the appropriator or the appropriator's successor in interest provides sufficient water
208     so as to not require beneficial use of the supplemental water right; [or]
209          (ix) a period of nonuse of a water right during the time the water right is subject to an
210     approved change application where the applicant is diligently pursuing certification[.]; or
211          (x) a water right subject to an approved change application for use within a water bank
212     that has been authorized but not dissolved under Chapter 31, Water Banking Act, during the
213     period of time the state engineer authorizes the water right to be used within the water bank.
214          (f) (i) The reasonable future water requirement of the public is the amount of water
215     needed in the next 40 years by:
216          (A) the persons within the public water supplier's reasonably anticipated service area
217     based on reasonably anticipated population growth; or
218          (B) other water use demand.
219          (ii) For purposes of Subsection (2)(f)(i), a community water system's reasonably
220     anticipated service area:
221          (A) is the area served by the community water system's distribution facilities; and
222          (B) expands as the community water system expands the distribution facilities in
223     accordance with Title 19, Chapter 4, Safe Drinking Water Act.
224          (g) For a water right acquired by a public water supplier on or after May 5, 2008,

225     Subsection (2)(e)(vii) applies if:
226          (i) the public water supplier submits a change application under Section 73-3-3; and
227          (ii) the state engineer approves the change application.
228          (3) (a) The state engineer shall furnish a nonuse application form requiring the
229     following information:
230          (i) the name and address of the applicant;
231          (ii) a description of the water right or a portion of the water right, including the point of
232     diversion, place of use, and priority;
233          (iii) the quantity of water;
234          (iv) the period of use;
235          (v) the extension of time applied for;
236          (vi) a statement of the reason for the nonuse of the water; and
237          (vii) any other information that the state engineer requires.
238          (b) (i) Upon receipt of the application, the state engineer shall publish a notice of the
239     application once a week for two successive weeks:
240          (A) in a newspaper of general circulation in the county in which the source of the water
241     supply is located and where the water is to be beneficially used; and
242          (B) as required in Section 45-1-101.
243          (ii) The notice shall:
244          (A) state that an application has been made; and
245          (B) specify where the interested party may obtain additional information relating to the
246     application.
247          (c) [Any] An interested person may file a written protest with the state engineer against
248     the granting of the application:
249          (i) within 20 days after the notice is published, if the adjudicative proceeding is
250     informal; and
251          (ii) within 30 days after the notice is published, if the adjudicative proceeding is
252     formal.

253          (d) In [any proceedings] a proceeding to determine whether the nonuse application
254     should be approved or rejected, the state engineer shall follow the procedures and requirements
255     of Title 63G, Chapter 4, Administrative Procedures Act.
256          (e) After further investigation, the state engineer may approve or reject the application.
257          (4) (a) The state engineer shall grant a nonuse application on all or a portion of a water
258     right for a period of time not exceeding seven years if the applicant shows a reasonable cause
259     for nonuse.
260          (b) A reasonable cause for nonuse includes:
261          (i) a demonstrable financial hardship or economic depression;
262          (ii) a physical [causes or changes] cause or change that [render] renders use beyond the
263     reasonable control of the water right owner so long as the water right owner acts with
264     reasonable diligence to resume or restore the use;
265          (iii) the initiation of water conservation or an efficiency [practices] practice, or the
266     operation of a groundwater recharge recovery program approved by the state engineer;
267          (iv) operation of a legal [proceedings] proceeding;
268          (v) the holding of a water right or stock in a mutual water company without use by
269     [any] a water supply entity to meet the reasonable future requirements of the public;
270          (vi) situations where, in the opinion of the state engineer, the nonuse would assist in
271     implementing an existing, approved water management plan; or
272          (vii) the loss of capacity caused by deterioration of the water supply or delivery
273     equipment if the applicant submits, with the application, a specific plan to resume full use of
274     the water right by replacing, restoring, or improving the equipment.
275          (5) (a) Sixty days before the expiration of a nonuse application, the state engineer shall
276     notify the applicant by mail or by any form of electronic communication through which receipt
277     is verifiable, of the date when the nonuse application will expire.
278          (b) An applicant may file a subsequent nonuse application in accordance with this
279     section.
280          Section 3. Section 73-10-4 is amended to read:

281          73-10-4. Powers and duties of board.
282          (1) The board shall have the following powers and duties to:
283          [(1) To] (a) authorize studies, investigations, and plans for the full development, [and
284     utilization] use, and promotion of the water and power resources of the state, including
285     preliminary surveys, stream gauging, examinations, tests, and other estimates either separately
286     or in consultation with federal, state and other agencies[.];
287          [(2) To] (b) enter into contracts subject to the provisions of this [act] chapter for the
288     construction of conservation projects [which] that in the opinion of the board will conserve and
289     [utilize] use for the best advantage of the people of this state the water and power resources of
290     the state, including projects beyond the boundaries of the state of Utah located on interstate
291     waters when the benefit of such projects accrues to the citizens of the state[.];
292          [(3) To] (c) sue and be sued in accordance with applicable law[.];
293          [(4) To] (d) supervise in cooperation with the governor and the executive director of
294     natural resources all matters affecting interstate compact negotiations and the administration of
295     [such] the compacts affecting the waters of interstate rivers, lakes and other sources of
296     supply[.];
297          [(5) To] (e) contract with federal and other agencies and with the National
298     [Reclamation] Water Resources Association and to make studies, investigations and
299     recommendations and do all other things on behalf of the state for any purpose [which] that
300     relates to the development, conservation, protection and control of the water and power
301     resources of the state[.];
302          [(6) To] (f) consult and advise with the Utah Water Users' Association and other
303     organized water users' associations in the state[.];
304          [(7) To] (g) consider and make recommendations on behalf of the state [of Utah] of
305     reclamation projects or other water development projects for construction by any agency of the
306     state or United States and in so doing recommend the order in which projects shall be
307     undertaken[.]; or
308          (h) review, approve, and revoke an application to create a water bank under Chapter

309     31, Water Banking Act, collect an annual report, maintain the water banking website, and
310     conduct any other function related to a water bank as described in Chapter 31, Water Banking
311     Act.
312          [(8)] (2) Nothing contained [herein] in this section shall be construed to impair or
313     otherwise interfere with the authority of the state engineer granted by Title 73, Water and
314     Irrigation, except as [herein] specifically otherwise provided in this section.
315          Section 4. Section 73-31-101 is enacted to read:
316     
CHAPTER 31. WATER BANKING ACT

317     
Part 1. General Provisions

318          73-31-101. Title.
319          This chapter is known as the "Water Banking Act."
320          Section 5. Section 73-31-102 is enacted to read:
321          73-31-102. Definitions.
322          As used in this chapter:
323          (1) "Applicant" means:
324          (a) a record holder of a perfected water right or a valid diligence claim applying for
325     board approval of a statutory water bank under Part 2, Statutory Water Banks; or
326          (b) a public entity applying for board approval of a contract water bank under Part 3,
327     Contract Water Banks.
328          (2) "Application" means an application submitted to the board to approve a water bank.
329          (3) "Approved change application" means a change application that the state engineer
330     approves to authorize a water right holder to deposit a water right in a water bank pursuant to
331     this chapter and Section 73-3-3 or 73-3-3.5.
332          (4) "Banked water right" means a water right, or a portion of a water right, deposited in
333     a water bank that the state engineer has authorized for use in a water bank through an approved
334     change application.
335          (5) "Board" means the Board of Water Resources.
336          (6) "Borrower" means a person seeking to use a banked water right within a water

337     bank's service area.
338          (7) "Contract water bank" means a water bank created pursuant to Part 3, Contract
339     Water Banks.
340          (8) "Delivery request" means a request to use a banked water right made by a borrower
341     in accordance with a water bank's policies approved under the water bank's application.
342          (9) "Deposit" means depositing a banked water right for use within the service area of a
343     water bank.
344          (10) "Depositor" means a person seeking to deposit a water right in a water bank.
345          (11) "Hereafter use" means the conditions of use the state engineer authorizes for a
346     banked water right during the term of an approved change application.
347          (12) "Heretofore use" means the authorized conditions of use that were in effect before
348     the state engineer approved a change application authorizing new conditions for the use of a
349     banked water right.
350          (13) "Loaned water rights" means a banked water right that is used pursuant to an
351     approved delivery request.
352          (14) "Perfected water right" means a water right evidenced by:
353          (a) a decree;
354          (b) a certificate of appropriation; or
355          (c) a proposed determination or court order issued in a general adjudication.
356          (15) "Public entity" means the same as that term is defined in Section 73-1-4 except for
357     the United States or an agency of the United States.
358          (16) "Reporting year" means November 1 through October 31.
359          (17) "Service area" means the geographic area where a water bank is approved to
360     operate and operates.
361          (18) "State engineer" means the state engineer appointed under Section 73-2-1.
362          (19) "Statutory water bank" means a water bank created pursuant to Part 2, Statutory
363     Water Banks.
364          (20) "Water bank" means a contract water bank or a statutory water bank.

365          (21) "Water banking website" means a website overseen by the board in accordance
366     with Section 73-31-103.
367          Section 6. Section 73-31-103 is enacted to read:
368          73-31-103. Notice -- Website.
369          (1) A notice required under this chapter shall be posted in accordance with Subsection
370     73-3-6(1) and to a water bank's website, unless otherwise specified.
371          (2) The board may create and oversee a website for the purpose of making water
372     banking information available to the public.
373          Section 7. Section 73-31-104 is enacted to read:
374          73-31-104. Objectives of water banks.
375          The objectives in creating a water bank are to:
376          (1) promote:
377          (a) the optimal use of the public's water;
378          (b) transparency and access to water markets;
379          (c) temporary, flexible, and low cost water transactions between water users; and
380          (d) Utah's agricultural economy by providing access to water resources and income for
381     Utah's agricultural industry; and
382          (2) facilitate:
383          (a) robust and sustainable agricultural production while meeting growing municipal
384     and industrial water demands, such as fallowing arrangements;
385          (b) water quality improvement;
386          (c) water rights administration and distribution; and
387          (d) a healthy and resilient natural environment.
388          Section 8. Section 73-31-105 is enacted to read:
389          73-31-105. Scope.
390          Nothing in this chapter prevents a person from entering into an agreement regarding the
391     use of a water right that differs from the requirements of this chapter, except that only a water
392     bank approved under this chapter may avail itself of the statutory provisions that apply to a

393     water bank.
394          Section 9. Section 73-31-106 is enacted to read:
395          73-31-106. Board assistance.
396          The board may direct the Division of Water Resources to assist the board in fulfilling
397     the board's responsibilities under this chapter.
398          Section 10. Section 73-31-107 is enacted to read:
399          73-31-107. Fees.
400          (1) The board may charge fees, set pursuant to Section 63J-1-504, to cover the costs of
401     processing and administering:
402          (a) a statutory water bank application; or
403          (b) a contract water bank application.
404          (2) The board shall charge a uniform fee for a statutory water bank application and a
405     uniform fee for a contract water bank application.
406          (3) The board may charge a different fee for a statutory water bank application than is
407     charged for a contract water bank application.
408          (4) Fees collected under this section shall be deposited in the General Fund as a
409     dedicated credit to be used by the board to implement this chapter.
410          Section 11. Section 73-31-201 is enacted to read:
411     
Part 2. Statutory Water Banks

412          73-31-201. Approval of statutory water bank.
413          (1) The board shall approve an application to create a statutory water bank that satisfies
414     this part.
415          (2) As a condition of approval, a statutory water bank is subject to this chapter.
416          Section 12. Section 73-31-202 is enacted to read:
417          73-31-202. Statutory water bank application.
418          (1) A record holder, other than the United States or an agency of the United States, of a
419     perfected water right or a valid diligence claim may request approval for a proposed statutory
420     water bank if the place of use and point of diversion for the applicant's water right are

421     encompassed within the proposed service area of the proposed statutory water bank and the
422     applicant files an application with the board that includes the following:
423          (a) the name of the statutory water bank;
424          (b) the mailing address for the statutory water bank;
425          (c) the type of legal entity recognized under Utah law that constitutes the statutory
426     water bank;
427          (d) a proposed service area map for the statutory water bank;
428          (e) whether the statutory water bank will accept deposits of surface water rights or
429     groundwater rights, provided that:
430          (i) a statutory water bank may not accept deposits of both surface water rights and
431     groundwater rights; and
432          (ii) the applicant's perfected water right or valid diligence claim is of the type accepted
433     by the statutory water bank;
434          (f) a copy of the statutory water bank's governing documents that specify:
435          (i) the number of members of the governing body, which may not be an even number;
436          (ii) the qualifications for governing members, including terms and election or
437     appointment procedures; and
438          (iii) the initial governing members' names, telephone numbers, and post office
439     addresses;
440          (g) a confirmation that the applicant satisfies the criteria listed in Subsection (1)(e)(ii);
441          (h) procedures that describe how the statutory water bank will:
442          (i) determine and fund the water bank's administrative costs;
443          (ii) design, facilitate, and conduct transactions between borrowers and depositors for
444     the use of a banked water right; and
445          (iii) accept, reject, and manage banked water rights, including:
446          (A) what information a depositor shall provide to inform the statutory water bank, the
447     state engineer, or any other distributing entity regarding the feasibility of using the water right
448     within the statutory water bank's designated service area;

449          (B) how a potential depositor is to work with the statutory water bank to jointly file a
450     change application seeking authorization from the state engineer to deposit a water right within
451     the statutory water bank;
452          (C) conditions for depositing a water right with the statutory water bank;
453          (D) how payments to depositors are determined; and
454          (E) under what conditions a depositor may use a water right at the heretofore place of
455     use pursuant to Subsection 73-31-501(4);
456          (iv) accept, review, and approve delivery requests, including:
457          (A) deadlines for submitting a delivery request to the statutory water bank;
458          (B) a cost or fee associated with submitting a delivery request and how that cost or fee
459     is to be applied or used by the statutory water bank;
460          (C) what information a borrower is to include on a delivery request to sufficiently
461     inform the statutory water bank, state engineer, or another distributing entity whether the
462     delivery request is feasible within the statutory water bank's designated service area;
463          (D) any notice and comment procedures for notifying other water users of the delivery
464     request;
465          (E) the criteria the statutory water bank will use to evaluate delivery requests;
466          (F) how the statutory water bank will inform water users who have submitted a
467     delivery request if the delivery request is approved or denied, the reasons for denial if denied,
468     and any applicable conditions if approved;
469          (G) appeal or grievance procedures, if any, for a borrower seeking to challenge a denial
470     of a delivery request, including identifying who has the burden in an appeal and the standards
471     of review;
472          (H) how the statutory water bank will determine prices for the use of loaned water
473     rights; and
474          (I) how the statutory water bank will coordinate with the state engineer to facilitate
475     distribution of approved delivery requests;
476          (v) how the statutory water bank will ensure that the aggregate amount of loaned water

477     rights during a calendar year does not exceed the total sum of the banked water rights within
478     the statutory water bank; and
479          (vi) how the statutory water bank will resolve complaints regarding the statutory water
480     bank's operations;
481          (i) the process that the statutory water bank will follow if the statutory water bank
482     terminates, dissolves, or if the board revokes the statutory water bank's permission to operate
483     pursuant to this chapter, including how the statutory water bank will return banked water rights
484     to depositors and how the statute water bank will return any amounts owing to depositors; and
485          (j) a signed declaration or affidavit from at least two governing members of the
486     statutory water bank affirming that:
487          (i) the information submitted is correct;
488          (ii) as a condition for permission to operate, the statutory water bank may not
489     discriminate between the nature of use, depositors, or borrowers;
490          (iii) the statutory water bank shall comply with the conditions of an approved changed
491     application for a banked water right; and
492          (iv) the statutory water bank shall report to the state engineer known violations of
493     approved change applications.
494          (2) The board may prepare a form or online application for an applicant to use in
495     submitting an application to the board under this part.
496          Section 13. Section 73-31-203 is enacted to read:
497          73-31-203. Action by board on statutory water bank applications.
498          (1) Upon receipt of an application under Subsection 73-31-202, the board shall record
499     the date the board receives the application.
500          (2) The board shall:
501          (a) examine an application for completeness to determine whether the application
502     satisfies this part;
503          (b) review an application to determine whether it meets the objectives of a water bank
504     described in Section 73-31-103;

505          (c) consider an application complete if the application satisfies the requirements of this
506     part; and
507          (d) notify the applicant of any additional information or changes needed to process the
508     application.
509          (3) Within 30 days of the date the board determines that an application is complete, the
510     board shall post notice of the application pursuant to Section 73-31-103.
511          (4) The notice required by Subsection (3) shall state:
512          (a) that an application to create a statutory water bank has been filed with the board;
513          (b) where an interested party may obtain a copy of the application and any additional
514     information related to the application; and
515          (c) the date, time, and place of the public meeting required by Section 73-31-204.
516          Section 14. Section 73-31-204 is enacted to read:
517          73-31-204. Public meeting -- Comments.
518          (1) On the date indicated in the notice posted under Subsection 73-31-203(3), the board
519     shall hold a public meeting to:
520          (a) inform water users within the service area of the proposed statutory water bank; and
521          (b) receive comments from water users regarding the application.
522          (2) The board shall accept public comments for a period of time no less than 30 days
523     after the adjournment of the public meeting.
524          (3) The board shall review public comments when reviewing the proposed statutory
525     water bank's application, but submitting a comment does not create a right of appeal of the
526     board's decision under Title 63G, Chapter 4, Administrative Procedures Act, nor is the board
527     required to address how or whether public comments impacted the board's decision.
528          (4) A statutory water bank may review public comments and comments from the board
529     before a final decision is made by the board. If the statutory water bank desires to make
530     changes to the statutory water bank's application, the statutory water bank may notify the board
531     in writing before the board takes action on the application that the statutory water bank will
532     submit a revised application following the same process that governs the filing and review of

533     the original application for a statutory water bank under this chapter.
534          Section 15. Section 73-31-205 is enacted to read:
535          73-31-205. Review of statutory bank application.
536          (1) After complying with Sections 73-31-203 and 73-31-204, the board shall approve
537     an application if the application satisfies Section 73-31-202, which is to be liberally interpreted
538     by the board to facilitate the objectives described in Section 73-31-104.
539          (2) In approving an application, the board shall:
540          (a) issue an order approving the statutory water bank;
541          (b) approve persons to serve as the initial members of the governing body in
542     accordance with the proposed statutory water bank's structure and Section 73-31-202; and
543          (c) publish the approved application on the water banking website.
544          (3) If the board denies an application, the board shall issue a written explanation to the
545     applicant that sets forth the reason for denial, provided that the board's decision regarding an
546     application does not create a right of appeal under Title 63G, Chapter 4, Administrative
547     Procedures Act.
548          Section 16. Section 73-31-206 is enacted to read:
549          73-31-206. Amending application.
550          (1) After the board approves a statutory water bank's application under this part, the
551     statutory water bank may seek to amend the statutory water bank's application by filing a
552     description of the proposed amendment with the board. The board shall follow the procedures
553     of Sections 73-31-201, 73-31-204, and 73-31-205 to approve an amendment to a statutory
554     water bank's application.
555          (2) An amendment approved by the board becomes effective on the first day of the next
556     reporting year.
557          Section 17. Section 73-31-301 is enacted to read:
558     
Part 3. Contract Water Banks

559          73-31-301. Approval of contract water bank.
560          (1) The board shall approve an application to create a contract water bank that satisfies

561     this part.
562          (2) As a condition of approval, a contract water bank is subject to this chapter.
563          Section 18. Section 73-31-302 is enacted to read:
564          73-31-302. Contract water bank application.
565          (1) A public entity may seek to have a contract for water use approved as a contract
566     water bank under this chapter by submitting an application to the board that meets the
567     following criteria:
568          (a) the name of the contract water bank;
569          (b) the mailing address for the contract water bank;
570          (c) the proposed service area map for the contract water bank;
571          (d) a description of how the contract water bank's governing body will be structured
572     and operate;
573          (e) a description for how water delivery requests and loaned water rights are to be
574     administered;
575          (f) criteria for the participation, if any, of non-public entities;
576          (g) includes a copy of the contract, provided that a public entity may redact any
577     information that is private, controlled, protected, or otherwise restricted under Title 63G,
578     Chapter 2, Government Records Access and Management Act;
579          (h) information regarding how the public can learn when the submittal of an
580     application or contract that is the basis of the contract water bank is on the agenda of a public
581     meeting of the public entity under Title 52, Chapter 4, Open and Public Meetings Act;
582          (i) whether the contract water bank will accept deposits of surface water rights or
583     groundwater rights, provided that a contract water bank may not accept deposits of both surface
584     water rights and groundwater rights; and
585          (j) the process the contract water bank will follow if the contract water bank
586     terminates, dissolves, or the board revokes the contract water bank's approval to operate
587     pursuant to this chapter, including how the contract water bank will return banked water rights
588     to depositors and how the contract water bank will return any amounts owing to depositors.

589          (2) The board may prepare a form or online application for an applicant to use in
590     submitting an application to the board under this part.
591          Section 19. Section 73-31-303 is enacted to read:
592          73-31-303. Action by board on contract water bank application.
593          (1) Upon receipt of an application for a proposed contract water bank, the board shall
594     record the day on which the board receives the application.
595          (2) The board shall:
596          (a) examine the application to determine whether changes are required for the board to
597     process the application in accordance with this part;
598          (b) review the application to determine whether it meets the objectives of a water bank
599     described in Section 73-31-103;
600          (c) consider the application complete if the application satisfies this part; and
601          (d) notify the applicant of any additional information or changes needed to process the
602     application.
603          (3) Within 30 days of the date the board determines that an application is complete, the
604     board shall post notice of the application in accordance with Section 73-31-103.
605          (4) The notice required by Subsection (3), shall state:
606          (a) that an application to approve a contract water bank has been filed with the board;
607     and
608          (b) where a person may review the application.
609          Section 20. Section 73-31-304 is enacted to read:
610          73-31-304. Review of contract water bank application.
611          (1) After complying with Section 73-31-303, the board shall approve an application for
612     a contract water bank if the application satisfies Section 73-31-302, which is to be liberally
613     interpreted by the board to facilitate the objectives described in Section 73-31-104.
614          (2) In approving an application, the board shall:
615          (a) issue an order approving the contract water bank; and
616          (b) publish a summary of the information submitted by the public entity under

617     Subsection 73-31-302(1) on the water banking website.
618          (3) If the board denies an application, the board shall issue a written explanation to the
619     applicant that sets forth the reason for the denial, provided that the board's decision regarding
620     an application does not create a right of appeal under Title 63G, Chapter 4, Administrative
621     Procedures Act.
622          (4) A contract water bank may review public comments and comments from the board
623     before a final decision is made by the board. If the contract water bank desires to make changes
624     to the contract water bank's application, the contract water bank may notify the board in writing
625     before the board takes action on the application that the contract water bank will submit a
626     revised application following the same process that governs the filing of an original
627     application.
628          Section 21. Section 73-31-305 is enacted to read:
629          73-31-305. Amending application.
630          (1) After the board approves a contract water bank's application under this part, the
631     contract water bank may seek to amend the contract water bank's application by filing a
632     description of the proposed amendment with the board. The board shall follow the procedures
633     of Sections 73-31-303 and 73-31-304 to approve an amendment to a contract water bank's
634     application.
635          (2) An amendment approved by the board becomes effective on the first day of the next
636     reporting year.
637          Section 22. Section 73-31-401 is enacted to read:
638     
Part 4. Reporting by Water Banks

639          73-31-401. Annual reports.
640          (1) (a) On or before November 30 of each year, the governing body of a water bank
641     shall submit to the board an annual report on the governing body's management of the water
642     bank's operations for the previous reporting year on a form provided by the board that provides
643     the information in Subsection (2).
644          (b) Proof to the satisfaction of the board that the water bank has mailed,

645     hand-delivered, or sent the annual report electronically is considered compliance with this
646     Subsection (1).
647          (2) The annual report shall include the following information for the prior reporting
648     year:
649          (a) a tabulation of the volume and change application number of water rights deposited
650     in the water bank;
651          (b) the nature of use of each banked water right before the banked water right was
652     deposited in the water bank and the volumes of water allocated to each use before being
653     deposited;
654          (c) a tabulation of loaned water rights from that water bank, which includes:
655          (i) the change application number;
656          (ii) the volume of water derived from the loaned water rights;
657          (iii) the nature of use of the loaned water rights and the volumes of water allocated to
658     each use; and
659          (iv) for a statutory water bank, the borrower;
660          (d) for a statutory water bank:
661          (i) the amounts charged for the loaned water rights, including a breakdown by nature of
662     use if appropriate;
663          (ii) the revenue generated by the statutory water bank, including the sources of
664     revenue;
665          (iii) the amounts paid out to depositors;
666          (iv) the statutory water bank's expenses;
667          (v) the balance at the end of the reporting year of the statutory water bank's bank
668     account;
669          (vi) the accounting practices used by the statutory water bank;
670          (vii) whether there is pending or ongoing litigation involving the statutory water bank;
671          (viii) whether there are, or have been, any governmental audits of the statutory water
672     bank;

673          (ix) any proposed amendments to an approved statutory water bank's procedures for the
674     coming reporting year;
675          (x) a narrative explanation of any inconsistencies in the annual report or in the
676     operation of the statutory water bank; and
677          (xi) a narrative explanation of how the statutory water bank is or is not fulfilling the
678     objectives described in Section 73-31-104; and
679          (e) a declaration or affidavit signed by at least two governing members of the statutory
680     water bank stating that the information in the report is correct.
681          (3) The board shall deliver a copy of the prescribed form to each water bank before
682     August 30 of each year.
683          (4) If the annual report contains the information required by this section, the board
684     shall post notice of the annual report in accordance with Section 73-31-103.
685          (5) If the annual report does not contain the information required by this section, the
686     board shall promptly notify the reporting water bank in writing and return the report to the
687     water bank for correction, providing a written explanation to the water bank that sets forth the
688     information that needs to be corrected. The water bank shall remain in good standing if the
689     water bank submits a corrected annual report that satisfies this section within 90 days of the
690     written notice of the board.
691          (6) If a water bank fails to submit an annual report by November 30, or fails to submit
692     a corrected annual report within 90 days of the rejection of an annual report, the water bank is
693     considered in noncompliance under this chapter.
694          Section 23. Section 73-31-402 is enacted to read:
695          73-31-402. Water bank noncompliance -- Revocation of application.
696          (1) If a water bank is in noncompliance with this chapter pursuant to Section
697     73-31-401, the board shall give the water bank a written notice of noncompliance that:
698          (a) explains why the water bank is in noncompliance; and
699          (b) gives the water bank a 90-day corrective period from the date of the notice to
700     correct the cause of the noncompliance.

701          (2) The board shall:
702          (a) post a notice given under Subsection (1) pursuant to Section 73-31-103; and
703          (b) notify the state engineer of the water bank's noncompliance.
704          (3) If the board determines that the water bank has corrected the noncompliance within
705     the 90-day corrective period, the board shall:
706          (a) provide the water bank written notice that the water bank's noncompliance has been
707     cured;
708          (b) post the written notice required under Subsection (3)(a) pursuant to Section
709     73-31-103; and
710          (c) notify the state engineer that the water bank has corrected the noncompliance within
711     the 90-day corrective period.
712          (4) (a) If the water bank fails to correct the noncompliance within the 90-day corrective
713     period, the water bank's approval to operate terminates at the end of the current calendar year.
714          (b) The board shall mail notice to the water bank that the water bank's approval to
715     operate has terminated and that the water bank's operations under the application shall cease at
716     the end of the current calendar year.
717          (c) The board shall post the notice required under Subsection (4)(b) pursuant to Section
718     73-31-103.
719          (d) A water bank shall notify the water bank's depositors and borrowers of the
720     dissolution within 60 days of receiving a notice under this Subsection (4) and shall enact the
721     procedures set forth in the water bank's application ceasing the water bank's operations.
722          (5) The state engineer may not approve a change application that seeks to deposit a
723     water right into a water bank that the board determines to be in noncompliance under this
724     chapter.
725          (6) A depositor retains title to deposited water rights and the water bank retains no
726     ownership in the deposited water rights.
727          Section 24. Section 73-31-501 is enacted to read:
728     
Part 5. Deposits


729          73-31-501. Banking water.
730          (1) A water right may be deposited with a water bank pursuant to an approved change
731     application filed under Section 73-3-3 or 73-3-3.5.
732          (2) The state engineer may not approve a change application that authorizes the use of
733     a water right within a water bank for any period of time that exceeds December 31, 2030.
734          (3) A banked water right is excused from beneficial use requirements pursuant to
735     Subsection 73-1-4 (2)(e)(x).
736          (4) A depositor of a banked water right may use the banked water right in its heretofore
737     use if:
738          (a) the depositor does so under the authority, control, and accounting of the water bank;
739          (b) the water bank informs the state engineer that the depositor's heretofore use is
740     consistent with the water bank's operating procedures for loaned water rights; and
741          (c) during the time the depositor uses the banked water right in its heretofore use, the
742     water bank does not allow the banked water right to be used for other uses within the water
743     bank.
744          (5) If an entity authorized to condemn a water right leases a water right under this
745     chapter, the entity may not begin the process of condemning the water right:
746          (a) while the entity leases the water right under this chapter; or
747          (b) within five years after the day on which the entity's lease of the water right under
748     this chapter ends.
749          Section 25. Section 73-31-502 is enacted to read:
750          73-31-502. Delivery request for loaned water rights in water bank.
751          (1) A borrower may use water from a water bank for any use within the water bank's
752     service area consistent with the objectives in Section 73-31-104 and the conditions, if any, of
753     the underlying approved change application.
754          (2) A borrower shall make use of a banked water right by submitting a delivery request
755     to the water bank that complies with the water bank's requirements.
756          (3) The state engineer administratively supervises delivery of water to a borrower. The

757     state engineer may:
758          (a) review an approved delivery request at any point in time to ensure the delivery
759     request complies with a state engineer order approving water rights for use in the water bank,
760     established distribution procedures based on priority, or both; and
761          (b) restrict delivery of loaned water rights if the approved delivery request causes
762     impairment to other water users.
763          (4) A water bank shall keep a daily accounting of loaned water rights.
764          (5) A water bank shall refer known illegal water use actions to the state engineer's
765     enforcement program pursuant to Section 73-2-25.
766          (6) A water bank is responsible for the payment of all distribution costs assessed for
767     the delivery of a banked water right under Section 73-5-1.
768          Section 26. Section 73-31-503 is enacted to read:
769          73-31-503. State engineer enforcement.
770          This chapter does not limit or impair the state engineer's enforcement powers set forth
771     in Section 73-2-25.
772          Section 27. Section 73-31-601 is enacted to read:
773     
Part 6. Board Reports

774          73-31-601. Reports.
775          (1) In accordance with Section 68-3-14, the board shall report annually by no later than
776     the November interim meeting of the Natural Resources, Agriculture, and Environment Interim
777     Committee regarding the implementation of this chapter.
778          (2) The board shall submit a written report to the Natural Resources, Agriculture, and
779     Environment Interim Committee by October 31, 2029, recommending whether the Legislature
780     should take one or more of the following actions:
781          (a) remove or extend the repeal date in Section 63I-1-273;
782          (b) amend the chapter, a provision in the chapter, or a provision in the Utah Code; or
783          (c) take no action and allow the chapter to repeal under Section 63I-1-273.
784          (3) At a minimum, the written report described under Subsection (2) shall include the

785     following:
786          (a) a summary of the implementation of the chapter;
787          (b) a statement describing and justifying the recommendation; and
788          (c) a description of the positive and negative aspects of the recommendation.
789          (4) Before the board's submission of the written report described in Subsection (2), the
790     Department of Natural Resources shall prepare and submit a draft report to the board for the
791     board's review, provided that the executive director of the Department of Natural Resources
792     may consult with another state agency or person that the executive director considers necessary
793     to prepare the draft report.
794          (5) (a) Upon receipt of the draft report described in Subsection (4), the board shall
795     review the draft report and solicit public comment on the draft report by:
796          (i) requesting written comments; and
797          (ii) holding no less than one public hearing at which:
798          (A) the Department of Natural Resources shall explain and justify the draft report's
799     recommendation; and
800          (B) an interested person may comment on or speak for or against the draft report's
801     recommendations.
802          (b) The board shall give notice of the opportunities to provide public comment under
803     this Subsection (5) by:
804          (i) mailing notice to the address of record for each water bank;
805          (ii) publishing notice in a newspaper of general circulation in the state; and
806          (iii) publishing notice as required in Section 45-1-101.
807          (c) The board may give separate notices for any public hearings the board may hold
808     pursuant to Subsection 73-31-601(5)(a)(ii).
809          (d) The notice described in Subsection (5)(b) shall state:
810          (i) that the board is soliciting public comment on the draft report and shall hold a
811     public hearing on a certain day, time, and place fixed in the notice, which shall not be less than
812     30 days after the day the first notice is published, for the purpose of hearing comments

813     regarding the draft report;
814          (ii) that the board shall accept written comments on the draft report for a period of no
815     less than 30 days after the day the first notice is published, and include instructions for how the
816     public may submit comments; and
817          (iii) how the public may obtain a copy of the draft report.
818          (6) The board shall consider timely public comments submitted under this section, and
819     may require the Department of Natural Resources to make revisions the board considers
820     necessary before approving and submitting the final written report required in Subsection (2).