SB 237 would allow for the establishment of flexible water accounts; enact the Kansas Water Banking Act; impose civil penalties for violations of the Water Appropriation Act or any rules and regulations adopted thereunder; and clarify lines of authority between the Department of Agriculture and the Kansas Department of Health and Environment (KDHE).

The bill would permit the holder of a groundwater water right not located within the boundaries of a chartered water bank to establish a flex account where the holder may deposit, in advance, water from the right for use in any five consecutive calendar years. The amount of water deposited in the account would be 90 percent of the holder's base average usage times five. The bill would define "base average usage" as the average amount of water actually used for a beneficial use during calendar years 1996 through 2000, excluding any amount used in any of those years in excess of the amount authorized by the water right.

The bill would require the Chief Engineer of the Division of Water Resources of the Kansas Department of Agriculture to implement a program providing for the issuance of term permits which would authorize the use of the water in the flex accounts at any time during the five consecutive calendar years, without annual limits on the use. The withdrawal of water under this program would have to be properly and adequately metered.

The Chief Engineer would be required to submit a written report on the implementation of this law to the House Environment Committee and to the Senate Natural Resources Committee.

The bill would be part of and supplemental to the Kansas Water Appropriation Act.

In addition, the bill would require that the cost of administration of the bill be paid for from fees for term permits. The bill would allow the Chief Engineer to establish rules and regulations setting the application fee for the term permit. The amount could not exceed $400 for the five-year period covered by the permit.

In addition, the bill would enact the Kansas Water Banking Act. The bill would allow for the chartering of water banks which would be private not-for-profit corporations leasing water from holders of water rights that have been deposited in the bank. The water banks also may provide safe deposit accounts for the deposit of unused water from a bankable water right which is placed in the bank for use in future years. A water bank may be a groundwater bank or a surface water bank, or both. Water banks may provide services to facilitate the sale or lease of water rights and would be prohibited from owning, buying, or selling water rights.

The bill would require that before a water bank is authorized to operate in the state, the bank's charter must be approved by the Chief Engineer of the Division of Water Resources. One of the features of the provisions relating to the charter of a water bank is that the operations of the bank will result in a savings of 10 percent or more in the total amount of groundwater consumed for a representative past period pursuant to water rights deposited in the bank, excluding groundwater located in certain intensive groundwater use control areas. In addition, before water rights or portions of water rights could be accepted for deposit or deposited in a safe deposit account, the bank, with the assistance of the Division of Water Resources, must determine the water right to be bankable according to provisions of the bill. Another aspect of the bill would require that the charter ensure that the total amount of groundwater leased each year from each hydrologic unit does not exceed 90 percent of the historic average annual amount collectively diverted pursuant to all deposited water rights or portions of water rights from the unit for a representative past period. Water banks would be chartered for a period of not more than seven years at which time the bank would be subject to a review by an evaluation team described below. The governing body of a water bank would have at least five members who are reasonably representative of public and private interests in water within the bank boundary.

The bill would provide that prior to July 1, 2002, there would be one groundwater bank chartered. After July 1, 2002, there could be another bank chartered that would have surface water as a component of the bank charter.

Water banks would contract with holders of water rights for deposit in the bank of all or a portion of any water right from a hydrologic unit within the bank boundary. A "bank boundary" would mean the geographic area where a water bank operates and conducts the function of a water bank and may encompass more than one hydrologic unit. A "hydrologic unit" would be defined to mean a defined area where water rights authorizing diversion of water from a source of supply may be deposited and water from the same source of supply may be leased, in accordance with the provisions of this bill, without causing impairment of existing water rights or a significantly different hydrological effect to other users of water from the same source or hydraulically connected sources of supply. Water rights must be deposited for a period of not more than five years; be subject to terms and conditions provided by contract; and be subject to terms and conditions imposed by the Chief Engineer.

When a water right, or a portion of a water right, has been deposited in the bank, water from that water right may be leased for use if it will be used within the bank boundary and in the same hydrologic unit from which the water right authorizing diversion of the water is deposited. Leased water would be subject to all provisions of the Kansas Water Appropriations Act, including all requirements relating to term permits. A water bank's decision of whether or not to lease water could not be based on the proposed use of the water.

With respect to safe deposit accounts in water banks, a holder of a water right may place unused water from the right for future withdrawal. The bill would limit the water to be deposited in the savings account to water that was unused in the immediate past calendar year. Only water from one water right would be placed in a safe deposit account and water from a water right could not be placed in more than one safe deposit account, except that water from linked water rights may be placed in a single safe deposit account. The bill would require that each calendar year that the water remains in a safe deposit account, the amount of water held in the account would decrease by a percentage established by the charter of the bank but in no case less than 10 percent annually of all amounts deposited. The bill would allow depositors of water in water safe deposit accounts to withdraw water subject to the provisions of the Kansas Water Appropriation Act, including but not limited to all requirements relating to term permits and other conditions outlined in the bill.

The bill would require on or before February 10 of each year a water bank to submit to the Chief Engineer a report containing various information outlined in the bill. The information to be contained in the report would be used to determine whether the conservation requirements of the bill were being reached. The Chief Engineer may require owners of water rights deposited in a water bank, owners of water rights that have placed water in safety deposit accounts, and persons leasing water from a water bank to file water use reports at a date earlier than March of each year.

The bill would authorize the Director of the Kansas Geological Survey (KGS) to convene a team to evaluate the operation of a water bank not later than five years after the establishment of a water bank. The team would consist of:

two members engaged in teaching or research at postsecondary institutions in subjects involving water resources;
a member who is an economist with knowledge and experience in water resources;
one member having knowledge and experience in water law;
two members having knowledge and experience in water policy issues and reside outside the bank boundary;
one representative of each groundwater management district located in whole or in part within the bank boundary; and
one representative of each water assurance district located in whole or in part within the bank boundary.

The team would submit a report of its evaluation and recommendation to the Governor, the Kansas Water Office, the Kansas Water Authority, the Secretary of Agriculture, the Chief Engineer, the Senate Committee on Natural Resources, and the House Environment Committee.

Unless otherwise provided by law, the bill would permit the Chief Engineer to extend the charter of a water bank for an additional period not to exceed seven years or permit the bank charter to lapse under the terms recommended by the evaluation team.

Under the provisions of the bill, depositing a water right in a water bank or placing water in a safe deposit account in a water bank would constitute due and sufficient cause for failure to use water for a lawful, beneficial use. In addition, the Chief Engineer would be permitted to adopt rules and regulations to administer and enforce the act.

The bill would grant the Chief Engineer the authority to suspend the use of water for failure to comply with the provisions of the bill subject to notice and hearing in accordance with the provisions of the Kansas Administrative Procedure Act. An additional provision of the bill would require water banks to pay all costs incurred by the Division of Water Resources and the KGS for assistance and services including costs for personnel. Payments received from the water banks would be deposited into either the Water Resources Cost Fund or the Geological Survey Cost Fund as appropriate to reimburse costs incurred by either the Division of Water Resources or the KGS.

The bill also would provide for civil penalties for violations of the Kansas Water Appropriation Act or any rule or regulation adopted thereunder; for violations of an order issued by the Chief Engineer of the Division of Water Resources relating to an intensive groundwater use control area; or any violation of a term, condition, or limitation imposed by the Chief Engineer as authorized by law. The amount of the civil penalty would be not less than $100 nor more than $1,000 per violation. In the case of a continuing violation, each day the violation continues could be deemed a separate violation. Upon finding that a person has committed one of the violations, the Chief Engineer could order the modification or suspension of the person's water right or use of water. Any person aggrieved by an order of the Chief Engineer may request a review by the Secretary of Agriculture and upon exhaustion of administrative remedies, may appeal to the district court in the manner provided by the Act for Judicial Review and Civil Enforcement of Agency Actions. The bill would be part of and supplemental to the Kansas Water Appropriation Act.

Further, the bill would amend KSA 2000 Supp. 65-171d, by clarifying that the Secretary of KDHE would establish water quality standards for the waters of the state to protect "their designated uses" rather than "their beneficial uses." The bill also would clarify that the Secretary of KDHE's authority does not extend to authority to the beneficial use of water, water quantity allocations, protection against water use impairment of a beneficial use, or any other function or authority under the jurisdiction of the Kansas Water Appropriation Act. The term "pollution" in this section would be modified to make it parallel with respect to the term "designated uses" of water.

The sponsor of the original bill testified before the Senate Natural Resources Committee and indicated that the bill would end the state's "use-it-or-lose-it" water policy. The sponsor also indicated the bill would give users maximum time flexibility as an incentive and would provide for a net reduction in water usage in return. Also appearing in support of the bill were representatives of the following: the Southwest Kansas Groundwater Management District; the Kansas Livestock Association; and the Kansas Farm Bureau. Written testimony in support of the bill was provided by the Southwest Kansas Irrigation Association. Appearing in a neutral position was the Chief Engineer.

The fiscal note on the original bill states that the Department of Agriculture indicates passage of the bill would require 8.0 FTE positions and expenditures of $411,016. Of this amount, $261,016 would be funded from the State General Fund and $150,000 from permit fees.

The Senate Committee of the Whole amended the bill to provide for the collection of a fee for the term permit issued by the Chief Engineer for the five-year period. The fee could not exceed $400 for the five-year period.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi