HBA-AMW C.S.S.B. 2 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 2 By: Brown, J. E. "Buster" Natural Resources 5/18/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Texas currently faces many water challenges. The 75th Legislature enacted major water planning legislation in 1997. C.S.S.B. 2 addresses the implementation and financing of the water strategies and recommendations identified in the last four years by the state's 16 regional water planning groups. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Natural Resource Conservation Commission in SECTION 1.01 (Section 9.012, Water Code), and SECTION 8.01 (Section 26.0286, Water Code), and to the Texas Water Development Board in SECTION 2.17 (Section 16.053, Water Code), SECTION 2.36 (Section 36.015, Water Code), SECTION 4.01 (Sections 15.903 and 15.907, Water Code), SECTION 4.02 (Section 15.955, Water Code), SECTION 4.07 (Section 15.102, Water Code), SECTION 4.08 (Section 15.105, Water Code), and SECTION 9.03 of this bill. ANALYSIS C.S.S.B. 2 amends the Water Code to modify provisions relating to the development and management of the state's water resources. Texas Water Advisory Council C.S.S.B. 2 creates the 13-member Texas Water Advisory Council (council) and sets forth provisions regarding council composition requirements, member terms, council officers and staff, meetings, and member compensation. The council is charged with the duty to heighten the level of dialogue on significant water policy issues and to provide focus and guidance on state water policy initiatives. Certain water authorities as set forth in the bill are required, on a five-year cycle, to provide the council with information regarding their administrative policies and performance standards. The council is required to submit a report, not later than December 1 of each even-numbered year, to the governor and the legislature regarding its findings from the reviews of the authorities. The bill also establishes provisions regarding the council's acceptance and use of gifts and grants, council funding, public participation, and the council's continuing right of supervision over certain water authorities (SECTION 1.01). Water Rights C.S.S.B. 2 modifies provisions regarding amendments to water rights and action on an application to appropriate unappropriated state water (SECTIONS 2.07 and 2.08). The bill authorizes a person to build, on the person's land, a dam or reservoir with normal storage of not more than 100 acre-feet of water for fish and wildlife purposes, other than aquaculture (SECTION 2.09). The bill modifies provisions regarding the forfeiture and cancellation of a permit for inaction, the effects of a permit on bays and estuaries and instream uses, cancellation in whole or in part of a permit, certified filing, or certificate of adjudication, and the Texas Natural Resource Conservation Commission (TNRCC) findings and action on a permit, certified filing, or certificate of adjudication (SECTIONS 2.10-2.13). Surface Water and Groundwater Management The bill modifies provisions regarding studies, investigations, and surveys of the state's surface and groundwater, the state water plan, regional water plans, and local water planning (SECTIONS 2.15-2.20). The bill requires the Texas Water Development Board (board) by rule, not later than January 1, 2002, to require a holder of a surface water permit, a certified filing, or a certificate of adjudication for surface water, a holder of a permit for the export of groundwater from a groundwater conservation district (district), a retail public water supplier, a wholesale water provider, an irrigation district, and any other person who is transporting groundwater or surface water 20 miles or more to report to the board information on certain water pipelines and other facilities that can be used for water conveyance (SECTIONS 2.17 and 9.03). The bill modifies provisions regarding the designation of groundwater management areas, identifying, designating, and delineating priority groundwater management areas (priority areas), TNRCC procedures for the designation of a priority area and for the protection of groundwater resources, and TNRCC's authorization to recommend to the legislature the creation of a special district or amendment of an existing district. The bill modifies procedures regarding the creation of a water district in a priority area and for adding a priority area to an existing water district (SECTIONS 2.22-2.28 and 2.37). The bill modifies provisions regarding the creation of a district (SECTIONS 2.32-2.37). The bill modifies provisions regarding the appointment, election, and fees of office of directors of a district, a district's conformation election, and lawsuits involving a district (SECTIONS 2.38, 2.39, 2.41-2.43). The bill adds provisions regarding an election to approve a district's taxing authority and to elect a director for a district in a priority area (SECTION 2.40). C.S.S.B. 2 modifies provisions regarding rulemaking power and the enforcement of rules in a district, a district's comprehensive management plan, the board's review and certification of a district's comprehensive management plan, and joint planning between districts in a groundwater management area (SECTIONS 2.44-2.48). The bill adds provisions regarding the failure of a district to conduct joint planning and the appointment of a receiver for a district (SECTIONS 2.55 and 2.57). The bill also modifies provisions regarding TNRCC action on the failure of a district to conduct joint planning, the failure of a district to submit a comprehensive management plan, and the determination by the state auditor that a district is not operational (SECTION 2.56). The bill amends provisions regarding permits for water wells, the regulation of spacing and production of water wells, and exemptions from, exceptions to, or limitations on water well permit requirements (SECTIONS 2.49-2.51). The bill modifies provisions regarding the transfer of groundwater out of a district, the authority of a district to set fees, and groundwater fees and the purchase of groundwater rights (SECTIONS 2.52-2.54). The bill also amends provisions regarding contracts between a water control and improvement district and a municipality (SECTION 2.58). The bill sets the maximum fee rate for water withdrawn from the Edwards Aquifer for agricultural use at $2 per acre-foot, rather than 20 percent of the fee rate for municipal use (SECTION 2.60). The bill authorizes the North Harris County Regional Water Authority to establish rates and classifications of fee payers and ratepayers as necessary to enable the authority to fulfill the authority's purposes and regulatory obligations and requires the authority to exempt certain classes of water wells from a fee on the amount of water pumped from the well (SECTION 2.61). Ratification of Groundwater Conservation Districts C.S.S.B. 2 ratifies the following groundwater conservation districts created in 1999 by the 76th Legislature: _Cow Creek Groundwater Conservation District; _Crossroads Groundwater Conservation District; _Hays Trinity Groundwater Conservation District; _Lone Wolf Groundwater Conservation District; _Lost Pines Groundwater Conservation District; _McMullen Groundwater Conservation District; _Middle Pecos Groundwater Conservation District; _Red Sands Groundwater Conservation District; _Refugio Groundwater Conservation District; _Southeast Trinity Groundwater Conservation District; _Texana Groundwater Conservation District; and _Tri-County Groundwater Conservation District (SECTIONS 3.0101-3.1209). Water Infrastructure Funding C.S.S.B. 2 creates the water infrastructure fund (infrastructure fund), administered by the board, to fund the implementation of water projects recommended through the state and regional water planning process that will encourage the conservation and development of water resources of the state. The bill sets forth provisions regarding the approval of applications for assistance by the board, applicable financial assistance provisions, and the sale of political subdivision bonds. The bill requires the board to adopt rules necessary to carry out provisions regarding the infrastructure fund, including rules establishing procedures for applications for and the award of financial assistance for water projects, for the investment of funds, and for the administration of the infrastructure fund not later than January 1, 2002. The bill modifies provisions regarding the transfer of money from the financial assistance account of the Texas water development fund II (financial assistance account) and the Texas water resources fund to include the provision of funds to the infrastructure fund (SECTIONS 4.01, 4.18, 4.23, and 9.03). Rural Water Assistance Fund The bill sets forth provisions regarding the creation, purpose, and use of the rural water assistance fund (rural fund), procedures for financially assisting rural political subdivisions, and the transfer of money from the water assistance fund and the financial assistance account to the rural fund. The bill requires the board to adopt rules necessary to administer provisions regarding the rural fund, including rules establishing procedures for the application for and award of loans, the distribution of loans, the investment of funds, and the administration of loans and the rural fund not later than January 1, 2002 (SECTIONS 4.02, 4.06, 4.22, and 9.03). The bill modifies provisions regarding the purpose of the Texas water assistance program, financial assistance through the water loan assistance fund, considerations in passing on an application for financial assistance from the water loan assistance fund, approval of such an application, and the method of making financial assistance available from the water loan assistance fund (SECTIONS 4.05 and 4.07-4.10). The bill modifies provisions regarding the use of money in the agricultural soil and water conservation fund (agricultural fund) and provides for the issuance of grants from the agricultural fund to districts and political subdivisions for equipment purchases. The bill provides that an additional purpose of the state water pollution control revolving fund (revolving fund) is to provide financial assistance to persons for nonpoint source pollution control and estuary management projects (SECTIONS 4.11, 4.12, and 4.14-4.15). C.S.S.B. 2 sets forth provisions regarding the collection of instream flow data, procedures for conducting studies of the state's rivers and streams, and conservation loans for brush control and precipitation enhancement (SECTIONS 4.17 and 4.21). The bill modifies provisions regarding conservation loans (SECTION 4.20). The bill amends the Tax Code to modify provisions regarding certain water conservation initiatives and to add provisions regarding water-related exemptions from limited sales, excise, and use taxes (SECTIONS 4.24 and 4.25). Joint Committee on Water Resources C.S.S.B. 2 creates the six-member Joint Committee on Water Resources (committee) to conduct an interim study and make recommendations regarding increasing the efficient use of existing water resources, developing sufficient long-term water financing strategies, improving existing water conveyance systems, the continuation of the council, determining the appropriate role of environmental and wildlife concerns in water permitting and water development, and protection of the natural condition of beds and banks of the state-owned watercourses (SECTIONS 5.01 and 5.02). The committee consists of two members of the senate appointed by the lieutenant governor, two members of the house of representatives appointed by the speaker of the house of representatives, and the chairs of the senate and house committee on natural resources. The bill sets forth provisions regarding meetings and hearings, reporting requirements, the authorization to perform and assistance in performing committee duties, committee staff, and the committee budget (SECTIONS 5.03-5.10). The bill specifies that provisions regarding the committee expire and the committee is abolished on January 1, 2003 (SECTION 5.11). Edwards Aquifer Authority C.S.S.B. 2 sets forth rulemaking procedures for the authority (SECTION 6.01). The bill requires the authority to conduct a contested case hearing on a permit application if a person with a personal justiciable interest related to the application requests a hearing on the application and to adopt rules establishing procedures for contested case hearings consistent with current law. The bill also repeals provisions subjecting the authority to the open meetings law, the open records law, and the Administrative Procedure and Texas Register Act. The bill specifies that the rules in 31 Texas Administrative Code Part 20 have no effect and that the secretary of state shall delete those rules (SECTIONS 6.02-6.05). Limited Liability for Aquatic Herbicide Application C.S.S.B. 2 specifies that, except for the powers and duties of the Parks and Wildlife Department concerning wildlife, a commercially licensed aquatic herbicide applicator working under contract with a river authority is not liable for damages in excess of $2 million for all types for personal injury, property damage, or death resulting directly or indirectly from the application of aquatic herbicide in compliance with such contract, applicable law, and the license terms or permit. The bill also provides that the control and elimination of noxious weeds, grasses, and vegetation in the rivers, tributaries, impoundments, and reservoirs of the state through the application by river authorities or their agents, employees, or contractors, in compliance with applicable law, licenses, and permits, of aquatic herbicides are essential government functions, and except to the extent provided by tort claims, nothing herein shall be deemed or construed to waive, limit, or restrict the governmental immunity of river authorities in the performance of such governmental functions (SECTION 7.01). Concentrated Animal Feeding Operations C.S.S.B. 2 requires TNRCC to process an application for authorization to construct or operate a concentrated animal feeding operation (CAFO) as a specific permit if, on the date TNRCC determines that the application is administratively complete, any part of a pen, lot, pond, or other type of control or retention facility or structure of the CAFO is located or proposed to be located within the protection zone of a sole-source surface drinking water supply (water supply). The bill provides that, for procedures applicable to permits for CAFOs, a land application area is not considered a control or retention facility. The bill requires TNRCC by rule to designate a surface water body as a water supply if that surface water body is identified as a public water supply in rules adopted by TNRCC and is the sole source of supply of a public water supply system, exclusive of emergency water connections. The bill requires TNRCC to designate a protection zone in certain areas (SECTION 8.01). The bill requires TNRCC by order, not later than the 45th day after the effective date of this bill, to identify surface water bodies that are considered "sole-source drinking water supplies" for purposes of processing an application for authorization to construct or operate a CAFO, and requires TNRCC to designate the protection zones for those identified water bodies. The bill specifies that the order expires on the date on which TNRCC adopts final rules designating a surface water body as a sole-source drinking water supply (SECTION 8.02). C.S.S.B. 2 repeals law relating to a petition to designate a groundwater management area, notice for designation of a groundwater management area, and the limitation on the rulemaking power of districts over water wells in certain counties (SECTION 9.02). EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 2 differs from the original bill by specifying that of the three members of the Texas Water Advisory Council (council) representing the general public, one member represents groundwater management, one member represents surface water management, and one member represents the environmental community. The substitute modifies the original bill by specifying that the council is prohibited from considering or discussing a specific permit or project or recommendation for a project only until the water permit has been issued by the state and all motions for rehearing have been overruled. The substitute differs from the original bill by requiring certain water authorities to provide to the council specified information and by requiring the council to conduct an analysis, rather than a review, of the authorities on a five-year cycle. The substitute removes Titus County Fresh Water Supply District No. 1, Franklin County Water District, and White River Municipal Water District from the water authorities required to submit information regarding performance standards and administrative policies to the council. The substitute modifies the original bill by adding that the council and the interagency water advisory account expire on September 1, 2003, unless extended by the 78th Legislature (SECTION 1.01). The substitute modifies the original bill by adding the holder of a permit, certified filing, or certificate of adjudication that includes irrigation use to the individuals authorized to use or supply water for an agricultural use that was classified as industrial or irrigation before September 1, 2001 (SECTION 2.07). The substitute decreases from 200 to 100 acre-feet of water the amount of normal storage for a dam or reservoir that a person is authorized to construct on the person's property without obtaining a permit and limits the uses for the dam or reservoir to commercial and noncommercial fish and wildlife purposes, other than aquaculture, if the property on which the dam or reservoir will be constructed is qualified open-space land on the basis of its use for wildlife management (SECTION 2.09). The substitute does not address a proposed permit exemption for a person who temporarily stores more than 200 acre-feet of water in a dam or reservoir. C.S.S.B. 2 modifies the original bill by specifying that the provision regarding forfeitures and cancellation of a permit for inaction do not apply to a permit for construction of a reservoir designed for the storage of more than 50,000, rather than 75,000, acre-feet of water (SECTION 2.10). The substitute adds groundwater conservation districts (districts) to the groups with which the executive administrator of the Texas Water Development Board (board) is required to coordinate to obtain or develop groundwater availability models for major and minor aquifers. The substitute differs from the original bill by providing that a person who fails to complete and return a survey of entities using groundwater and surface water commits a Class C misdemeanor (SECTION 2.15). The substitute modifies the original bill by requiring the board, in coordination with the Texas Natural Resource Conservation Commission (TNRCC), the Department of Agriculture, and the Parks and Wildlife Department, to give due consideration to the protection of agriculture and the natural resources of the state when adopting guidance principles for the state water plan (SECTION 2.16). The substitute adds provisions regarding a regional planning group's examination of and reporting of information relating to financing needed to implement the group's regional water plan (SECTION 2.19). The substitute differs from the original bill by authorizing an entity requesting a change to request that the board review the decision of the regional planning group and consider changing the state-approved regional plan if the requesting entity is dissatisfied with the decision (SECTION 2.20). The substitute adds the requirement that, not later than the 30th day after the date on which the board of a district to which a priority groundwater management area (priority area) is being added declares that the priority area is added to the district, the board of the existing district appoint a person or persons to represent the priority area until the next regularly scheduled election or appointment of directors (SECTION 2.27). C.S.S.B. 2 modifies the original bill by specifying that districts are the state's preferred method of groundwater management through rules developed, adopted, and promulgated by a district (SECTION 2.30). The substitute modifies the original bill by adding that a notice of the creation of a district must contain the date, time, and location of the public meeting and must be published in one or more newspapers of general circulation in the area of the proposed district (SECTION 2.35). The substitute modifies the original bill by specifying that the same ballot providing for the confirmation of the creation of a district in a priority area or another ballot must provide for the election of permanent directors for the district and by requiring the temporary board of directors of a district to continue operations to pay any debts until all debts are paid if the majority of votes cast at the election to create the district are against the creation of the district (SECTION 2.39). The substitute also modifies the original bill by specifying that the ballot for the levying of a maintenance tax by a district in a priority area or another ballot must provide for the election of permanent directors of the district and by requiring the temporary board of directors of the district to turn over the operations of the district to the elected permanent directors immediately after the election (SECTION 2.40). C.S.S.B. 2 differs from the original bill by increasing from $100 to $150 a day the fees of office for each day the director of a district actually spends performing the duties of a director and by increasing from $6,000 to $9,000 a year the maximum annual amount a director may receive (SECTION 2.42). The substitute modifies the original bill by decreasing from $10,000 to $5,000 per day per violation the maximum amount of a civil penalty for the violation of a district rule. The substitute authorizes a district, in addition to a civil penalty or any other penalty provided by law, to seek and requires a court to grant a penalty equal to 115 percent of the economic benefit gained from the violation (SECTION 2.45). C.S.S.B. 2 removes provisions regarding the Texas Water Trust and the water trust account, amendments to water rights, additional requirements for water conservation plans and drought contingency plans, temporary permits, the inclusion in a permit of certain conditions considered necessary to maintain fish and wildlife habitats and existing instream uses and water quality of a stream or river, and the operation of the Texas Water Bank. The substitute removes provisions regarding the state water plan, prohibitions against the certification of a petition by TNRCC because a proposed district cannot be adequately funded, the rulemaking power of a district, a district's comprehensive management plan, and joint planning between districts in a groundwater management area. C.S.S.B. 2 modifies the original bill by providing that rules adopted by a district to regulate spacing and production of water wells must provide for the protection of agriculture, municipal, and natural resources. The substitute modifies the original bill by adding provisions regulating the production of groundwater by water wells. The substitute also adds provisions authorizing a district, in promulgating any rules limiting groundwater production, to preserve historic use before the effective date of the rules to the maximum extent practicable consistent with the district's comprehensive management plan. The substitute authorizes a district to consider the service area or service needs of a retail water utility in regulating the production of groundwater based on tract size or acreage (SECTION 2.50). The substitute differs from the original bill by prohibiting a groundwater conservation district from denying an application for a permit to drill and produce water for hydrocarbon production activities if the application meets all applicable rules as promulgated by the district, rather than the spacing, density and production rules applicable to permitted water wells in the district (SECTION 2.51). The substitute modifies the original bill by authorizing a district to impose a reasonable fee or surcharge for an export fee for a fee-based district using a 50 percent export surcharge, in addition to the district's production fee, for water transferred out of the district. The substitute decreases from five years to at least three years the time period for which water may be transferred out of a district if the construction of a conveyance system has not been initiated prior to the issuance of a permit and increases from 30 years to at least 30 years the time period for such a transfer if construction of a conveyance system has been initiated prior to the issuance of a permit. The substitute differs from the original bill by providing that provisions regarding the transfer of groundwater out of a district apply only to a transfer of water that is initiated or increased after September 1, 1997, rather than March 1, 2001. The substitute adds provisions regarding circumstances under which the transfer of groundwater produced within the district's boundaries for use outside the district's boundaries is not considered a transfer outside of the district (SECTION 2.52). The substitute adds provisions modifying the fee rate for water withdrawn from the Edwards Aquifer for agricultural use (SECTION 2.60). The substitute adds provisions authorizing the North Harris County Regional Water Authority to establish rates and classifications of fee payers and ratepayers as necessary to enable the authority to fulfill the authority's purposes and regulatory obligations and providing for the exemption of certain classes of water wells from a fee on the amount of water pumped from the well (SECTION 2.61). C.S.S.B. 2 removes the provision prohibiting a district from imposing a fee or surcharge for an export fee on the withdrawal of water from land owned prior to March 1, 2001, by a political subdivision if the district pays a tax mitigation fee. The substitute removes the provision prohibiting the disclosure of personal information relating to the volume or units of utility usage or the amounts billed to or collected from an individual for utility usage. C.S.S.B. 2 differs from the original bill by modifying the method of electing directors for the Cow Creek Groundwater Conservation District (Cow Creek District) and by prohibiting the Cow Creek District from issuing any bonds secured by ad valorem taxes before September 1, 2004 (SECTIONS 3.0106 and 3.0112). The substitute removes provisions regarding the finding of benefit for and validation of the Cow Creek District. The substitute modifies the original bill by adding that the directors of the Crossroads Groundwater Conservation District (Crossroads District) for Places 1-4 are appointed by the Victoria County Commissioners Court and the directors for Places 5-7 are appointed by the city council of the City of Victoria and by adding that a vacancy in the office of director is filled for the remainder of the term by appointment by the commissioners court or the city council, as appropriate (SECTIONS 3.0206 and 3.0208). The substitute modifies the original bill by specifying that, except for the temporary and initial directors, the four-year terms of the directors of the Crossroads District are staggered (SECTION 3.0208). C.S.S.B. 2 modifies the original bill by specifying that the board of directors of the Hays Trinity Groundwater Conservation District (Hays Trinity District) are appointed by the Hays County Commissioners Court (SECTION 3.0307). The substitute removes provisions regarding the finding of benefit for the Hays Trinity District and the power of the district to limit the transfer of groundwater out of the district. The substitute removes provisions regarding the validation of past acts of and the applicability of law to the Lone Wolf Groundwater Conservation District (Lone Wolf District). The substitute removes provisions regarding the statutory interpretation of provisions relating to the Lost Pines Groundwater Conservation District and the McMullen Groundwater Conservation District (McMullen District) and the provision establishing that a person is not eligible to serve as an initial or permanent director of the McMullen District unless the person owns land in the district. The substitute differs from the original bill by modifying the procedures regarding the service of directors after the county commissioners precinct boundaries are changed in the Lone Wolf District, the McMullen District, the Middle Pecos Groundwater Conservation District, the Refugio Groundwater Conservation District (Refugio District), the Texana Groundwater Conservation District (Texana District) (SECTIONS 3.0406, 3.0606, 3.0706, 3.0906, and 3.1106). The substitute modifies the original bill by prohibiting the Southeast Trinity Groundwater Conservation District from issuing bonds before September 1, 2004, and by removing provisions regarding the finding of benefit for the district (SECTION 3.1007). The substitute removes provisions regarding the applicability of other law and modifies provisions regarding the board of directors of the Red Sands Groundwater Conservation District to provide that an individual must own real property in the district to qualify to serve as a director. C.S.S.B. 2 differs from the original bill by authorizing money in the water infrastructure fund to be used to pay for the implementation of water projects recommended through state and regional water planning processes (SECTION 4.01). The substitute modifies the original bill by adding TNRCC to the governmental agencies required to jointly establish and continuously maintain an instream flow data collection and evaluation program and to conduct studies and analyses of the state's rivers and streams and adds TNRCC to provisions regarding the program, studies, and analyses. The substitute also modifies the original bill by exempting any stream that consists only of floodwaters and is dry more than 75 percent of the year from provisions regarding the collection of instream data and studies and analyses of the state's rivers and streams (SECTION 4.17). The substitute modifies the original bill by exempting equipment, services, or supplies used to construct a component of a system sponsored by a political subdivision that is certified by TNRCC as providing regional water or wastewater service from limited sales, excise, and use taxes (SECTION 4.25). The substitute removes provisions regarding funding for local economic development programs and the collection of a bottled water surcharge by the comptroller of public accounts. C.S.S.B. 2 adds additional recommendations that the joint committee on water resources is required to make and additional information the committee is required to receive (SECTIONS 5.02 and 5.04). The substitute adds provisions regarding rulemaking procedures for the Edwards Aquifer Authority, limited liability for aquatic herbicide application, concentrated animal feeding operations, and the existing priority of any industrial water right holder on the mainstem of the Rio Grande below Amistad Reservoir who uses or supplies water to a nursery grower (SECTIONS 6.01-6.05, 7.01, 8.01, 8.02, and 9.03).