WASHINGTON STATE ASSOCIATION OF MUNICIPAL ATTORNEYS Fall Conference October 4-6,2006 Spokane, Washington

Transcription

1 WASHINGTON STATE ASSOCIATION OF MUNICIPAL ATTORNEYS 2006 Fall Conference October 4-6,2006 Spokane, Washington Presented by: Kathy Gerla, Member Foster Pepper PLLC 1111 Third Avenue, Suite 3400 Seattle, Washington Phone: (206) Fax: (206) KATHRYN L. GERLA is a Member at Foster Pepper PLLC, where she practices environmental and land use law. She advises private and public clients concerning water rights, water quality, Endangered Species Act, SEPA/NEPA, and contaminated property and hazardous waste management. Prior to joining Foster Pepper, Ms. Gerla was a Senior Assistant Attorney General with the Washington State Attorney General's Office, where she represented the Departments of Ecology and Natural Resources. Ms. Gerla served as lead counsel for the Department of Ecology's Water Resources Program. Ms. Gerla graduated from Gonzaga University School of Law in 1987, summa cum laude, and clerked for the Washington State Supreme Court. She is a past chair of the Executive Board of the Environmental and Land Use Law Section of the Bar Association.

2 I. CHALLENGE TO MUNICIPAL WATER SUPPLY ACT OF 2003 On September 1, 2006, a coalition of environmental groups and several individuals filed a lawsuit challenging the validity of the Municipal Water Supply Act of 2003, 2ESSHD 1338 (hereafter 1338), on several constitutional grounds. Copies of the Complaint and of 1338 are attached. If successful, this lawsuit could have significant ramifications for municipal water suppliers such as cities, public utility districts, and water districts. For a number of years prior to passage of 1338 there had been disputes between municipal water suppliers, the Department of Ecology (Ecology), and others concerning the nature and extent of municipal water rights. The primary purpose of 1338 was to resolve many of these issues, and thereby provide certainty to water purveyors concerning their water rights and flexibility to allow them to "grow into" those rights. The primary provisions of 1338 affecting water rights -- that are the subject of the recent lawsuit -- are discussed below. 1. Pumps and Pipes Certificates One of the most significant disputes has been over inchoate rights. or the validity of "pumps and pipes" water right permits and certificates. For 40 years 1:cology and its predecessor agency implemented a policy of issuing water right certificates based on the capacity of the water supply system once the system was built and capable of delivering water, even if the water had not been used. Quantifying a water right based on system capacity rather than on the amount - of water actually used is known as the "pumps and pipes'' method. Estimates are that Ecology has issued thousands of water right certificates based on the pumps and pipes method. A concern raised by those who oppose this method is that certificates have been issued for quantities far beyond the amount of water actually being used by the water system-known as "paper" water rights. In the 1990's Ecology changed its policy, and began quantifying rights based on actual use. The issue came to a head in a Washington Supreme Court decision, Deparrrnent of'ecology v. Theodoratus, 135 Wn.2d 582, 957 P.2d 1241 (1 998). The case involved a water supply system being built to serve a residential development owned by a private limited partnership. In that case, the Supreme Court held that the pumps and pipes methodology of quantifying a water right, rather than actual beneficial use, was invalid. However, the Court found that the developer in that case was not a municipality, and expressly declined to address issues concerning municipal water suppliers in the context of that case. The Court also noted that the water right statutes did allow for differences between municipal and other water uses. 135 Wn.2d at 594. After the Theodoratus decision, the state took the position that the pumps and pipes method of quantifying water rights was not allowed under the water codes and that a certificated right would only be valid for the amount of water that had been actually used at the time the certificate was issued. This position applied to all water right certificates, even those issued to municipalities or other governmental entities. This put at risk many water right certificates that had been issued to public water purveyors over the years based on the pumps and pipes method of perfection.

3 In order to resolve this debate and provide certainty, as part of 1338 the Legislature declared that pumps and pipes water right certificates issued for municipal water supply purposes prior to the effective date of the act (September 9, 2003) were rights "in good standing" (3); RCW (3). However, for certificates issued to municipal water suppliers after that date, the certificate could only be for "the perfected portion of a water right as demonstrated through actual beneficial use of water" (4); RCW (4). 2. Place of Use/Conservation There had also been debate between the state and municipal water right holders about the place of use for some municipal water rights. Over the years, the Department of Ecology had described places of use in different ways; for example, "service area", quarter sections, or the name or jurisdictional boundaries of the municipal water right holder (e.g., "City of "). Disputes arose over whether some of those descriptions were fixed at the date of issuance of the certificate, or whether they were dynamic and allowed the place of use to grow along with the jurisdictional boundaries or the service area. If the place of use was not dynamic, then the water right holder would have to apply to Ecology for a change in the place of use. Igowever, if a surface water right had not been perfected through actual beneficial use (e.g. water under a pumps and pipes certificate that had not been historically used), then Ecology took the position the right could not be changed, pursuant to the Washington Supreme Court case of Okanogan Wilderness League, Inc. v. Town of Twisp, 133 Wn.2d 769, 947 P.2d 732 (1997). In that situation, a municipal water right holder attempting to grow into and use the unused portion of its water right certificate was unable to do so. Section 5 of 1338 resolved this by providing that the place of use of a surface or groundwater right held by a municipal water supplier is coextensive with the service area approved by the Department of Health or local legislative authority, if: (1) the supplier is in compliance with the terms of its water system plan, including conservation requiremcnts; and (2) the addition to the place of use is not inconsistent with comprehensive plans, development regulations, other applicable land use plans, or approved watershed plans adopted under RCW (1) (2); RCW (2). A municipal water supplier no longer has to apply to the Department of Ecology for a change in place of use. The "quid pro quo" for much of the flexibility and certainty given to municipal water suppliers was that the suppliers are required to implement cost-effective water conservation provisions as part of their water supply plans (3), 7; RCW (3); RCW A Also, a municipal water supplier has a duty to serve retail water service within its retail service area ; RCW Definition of "Municipal Water Supplier" The Legislature also provided for the first time in statute a definition of "municipal water supplier". Those included within the definition not only get the benefit of the new provisions in 1338 providing flexibility and certainty, but they also qualify for the exemption from relinquishment of water rights for municipal water suppliers that has existed in the water code for a number of years. See RCW (2)(d). - PAGE 2 FOSTER PEPPER.... -

4 A "municipal water supplier" is an entity that supplies water for "municipal water supply purposes". Significantly, the definition is not limited to governmental entities. It can include nongovernmental entities if they supply water for residential purposes through 15 or more service connections or for a nonresidential population that is, on average, at least 25 people for at least 60 days a year (4)(a); RCW (4)(a). The definition of qualifying "municipal water supply purposes" for governmental entities is quite broad. It includes uses "for governmental or governmental proprietary purposes by a city, town, public utility district, county, sewer district, or water district", as well as "any other beneficial use of water under the right generally associated with the use of water within a municipality" (4)(b); RCW (4)(b). It also expressly includes non-consumptive uses "that benefit fish and wildlife, water quality, or other in-stream resources or related habitat value", or uses needed to implement environmental obligations in specified plans and licenses (1), (2); RCW (1), (2). B. DEMAND LETTERS TO ATTORNEY GENERAL On May 22, 2006, a number of Indian tribes submitted a "taxpayer demand" letter to Washington State Attorney General Rob McKenna requesting him to investigate and take action to invalidate alleged unconstitutional provisions of The Tribes also asked the Attorney General to "enjoin" or stop state agencies and local governments from retroactively applying On June 8, 2006, the Washington Environmental Council, the Sierra Club, the Center for Environmental Law and Policy, Puget Sound Harvesters and several individuals (hereafter environmental groups) filed a similar letter with the Attorney General. On June 29,2006, the Attorney General's Office responded and declined to commence litigation to challenge the municipal water law. Copies of the letters and denials may be found on the Department of Ecology's web site, at muni wtr.htin1. C. LAWSUIT CHALLENGING 1338 On September 1,2006, the environmental groups filed a lawsuit in King County Superior Court challenging the constitutionality of several provisions of The Tribes have not, as of this date, filed a lawsuit. The suit was brought against the State of Washington and against the two agencies primarily responsible for implementing the Department of Ecology and the Department of Health. 'The lawsuit is a facial challenge (not as applied to a particular set of facts) to three provisions in 1338: the definitions of "municipal water supplier" and "municipal water supply purpose" in sections l(3) and l(4); - PAGE 3 - FOSTER PEPPER,,..

5 the dynamic place of use provisions in section 5(2); and the provision declaring "pumps and pipes" certificates to be in good standing in section 6(3). The environmental groups allege that these sections violate three different provisions in the Washington and/or United States Constitutions: separation of powers, substantive due process, and procedural due process. a. Separation of l'owers IJnder the separation of powers doctrine, if the Washington Supreme Court has interpreted a law and decided its meaning, the Legislature cannot retroactively overrule or change that interpretation as applied to past events. The Legislature may only change the law as applied prospectively to future events. l'he environmental groups allege that the Supreme Court in Theodoratus determined (1) that private, nongovernmental water purveyors were not municipalities; and (2) that "pumps and pipes" certificates were not valid and that Ecology could only issue certificates based on actual beneficial use of water. They allege that by including nongovernmental entities in the definition of municipal water suppliers and by declaring that "pumps and pipes" certificates issued before September are rights in good standing, the Legislature has violated the separation of powers doctrine by attempting to "overrule" the Supreme Court's decision in Theodoratus. b. Substantive Due Process r 7 1 he environmental groups also claim that the municipal water supplier definition, as well as the pumps and pipes and dynamic place of use provisions, violate the substantive due process provisions of the state and federal constitutions because they retroactively impair the vested water rights of junior water right holders. They rely on a water rights case decided by the Arizona Supreme Court, Sun Carlos Apache Tribe v. Superior Court, 193 Ariz. 195,972 P.2d 179 (1999). In Sun Carlos Apache, the court found legislation that, among other things, amended the relinquishment laws to retroactively revive senior rights that had already been relinquished violated substantive due process. The court held that the legislature may not pass retroactive legislation that deprives an individual of a vested right, and that the priority date of a water right was a vested property right. 972 P.2d at 189. Therefore, legislation that retroactively revived senior rights that had been relinquished under prior law impaired junior appropriators who may have advanced in priority due to the forfeited water rights and violated due process. Here, the environmental groups allege that adding nongovernmental entities to the definition of "municipal water supplier'' and thereby providing them the benefit of the municipal exemption from relinquishment retroactively resurrects forfeited rights to the detriment of junior water right holders who may have advanced in priority. They also allege that the pumps and pipes provision in 1338 retroactively expands the water rights of all municipal water suppliers by perfecting the unused portion of the rights-and thereby decreases the rights ofjunior holders. Similarly, the environmental groups conclude that section 5(2) providing for a dynamic place of use harms other water right holders by increasing the amount of water that may be used and by changing the pattern of return flows. - PAGE 4 -

6 c. Procedural Due Process Finally, the environmental groups claim that the three challenged provisions violate procedural due process by depriving junior water right holders of a property right without prior notice and an opportunity for hearing. They allege that the pumps and pipes provision and the dynamic place of use provision both expand municipal water rights without any impairment analysis or prior notice to other water right holders who may want to protest. 2. Relief Kequested/Possible Effect of Lawsuit The environmental groups have requested that all the challenged provisions be declared invalid in their entirety-not just as applied to nongovernmental purveyors. If the plaintiffs are successful, this lawsuit could have significant effects on governmental water purveyors. Certainly the invalidation of the pumps and pipes provision will have a significant effect on any purveyors who have pumps and pipes certificates issued before September 9,2003, and could limit those certificates to the amount of water actually used at the time the certificates were issued. Purveyors who already took advantage of the place of use provision to modify their place of use to be consistent with their approved service area may be at risk of being told they are now using water outside the authorized place of use in their water right. Those who wanted to expand their place of use in the future may now have to apply to the Department of Ecology for a change to their water right. Historic debates over what is the place of use of a given municipal water right in light of the various methods used by Ecology to describe the place of use for municipal rights will continue. With respect to the definitions of municipal water supplier and purpose, although the plaintiffs' concern seems to be with the inclusion of nongovernn~ental entities, they have not narrowed their request for relief to just that portion of the definitions. Rather, they have asked for the entire definitions to be declared invalid. If they pursue that request and prevail, public water purveyors will lose the certainty and other benefits of those definitions. Historic debates over what uses are "municipal" will continue. IT. IMPLEMENTATION OF 1338 There are a number of rules, policies, interpretations, and guidance documents currently being developed by the Department of Ecology and the Department of Health to interpret and implement The current drafts and status of these documents can be found at the agencies' web sites (see attached).

7 Water Resources Program - Municipal Water Law Page 1 of 5 & > W&e~Resources Home > Water Right Information > Municipal Water Law Municipal Water Law Complaint for Declaratory and Injunctrve Rellef NEW! Background 1 Documents Under Deve Introduction Municipal water is an important element of water management in Washington state. This web page is restricted to issues relevant to the Department of Ecology from the 2003 Municipal Water Law (Municipal Water Supply - Efficiency Requirements Act Chapter 5, Laws of 2003). Background Documents 2E2SHB Munrclpal Water Supply - Efflcrency Requirements Act Chapter 5, Laws of (AKA "Municipal Water Law") Munrclpal Water Law Agency Respons~b~l~t~es Outlhne (June 23, 2006) This document descr~bes the roles of the Department of Health and the Department of Ecology In implementing the 2003 Municipal Water Law. It brlefly descr~bes how each agency wrll incorporate their role into a legal mechanrsm, rf applicable, and a schedule for completion. Memoranda of Understanding: Memorandum of Understanding for Coord~natlon of water System Plans and Water Rlght Appl~catlon Revlew memorandum related to coor-d~natm ofthe Dep~ytment of~ecoloqy's Water resources program and the Department of Health's drlnklng Water Program Umbrella agreement between the Departments of Health and the Ecology Municipal Water Bill (2E2SHB 1338) Ecology /DOH Review of Policy Questions January 26, 2004 (AKA "Muni Matrix") Documents Under Development Implementing the 2003 Municipal Water Law is complex and requires coordination between many groups and agencies, primarily between the state Department of Health, Office of Drinking Water and the Department of Ecology, Water Resources Program. The two agencies are working together on developing implementation guidance. MOU - the MOU describes how the two agencies (Health and Ecology) will work together in implementing the 2003 Municipal Water Law. A primary reason for the updating of the existing, 2002 MOU is to include recent statutory changes for municipalities and watershed planning. The content of the MOU will be general, with appendices dealing with specific needs. Contact Doug Rushton for the current status of this document. Guidance Documents for Ecology Staff

8 Water Resources Program - Municipal Water Law. Page 2 of 5 Ecology has developed several staff guidance documents to streamline and improve consistency between regions in the coordination and review of documents for water rights administration and Water System Plan/Small Water System Management Program reviews. If you are interested in a document from the following list, contact Doug Rushton As these documents are developed by Ecology's internal Municipal Water Law implementation group, they will be presented to the Water Resource Program Management Team (PMT). Once the PlYT has approved them and they receive Ecology management concurrence (as needed), they will be posted to this website. The following documents are intended for Ecology staff use in their reviews and have been approved by the Water Resources Program Management Team: 2003 Munlc~pal Water Law Interpretwe and Policy Statement (June 22, 2006) NEW! This document was developed under the auspices off the Admin~strative Procedure Act (Ch RCW). The document is a statement of intent for how Ecology interprets and plans to implement the 2003 Municipal Water Law (E2E2SHB 1338). Ecology is accepting comments on this document until July 31, Place of Use Language for Water Rlghts Place of Use Language Analysis Summary: Water Resources staff have analyzed municipal water rights issued since the effective date of the 2003 Municipal Water Law (i.e. 9/9/03). We have concluded as Water Resources staff work with water rights documents that may have "place of use" language that differs from the now preferred language, they may adjust the place of use language. In some cases that may arise, more immediate action will be taken as necessary. For the 327 rights that have been issued between September 2003 and January of 2006, place of use language has been varied. Inasmuch as the place of use changes by operation of law provided the criteria in RCW are met, having outdated place of use language on a water right document is not particularly problematic. We are working on similar language for other water right documents, as appropriate. The language to be used (since December, 2005) and approved by the Water Resources Program Management Team is: The place of use (POU) of this water right is the service area described in the most recent Water System Plan/Small Water System Management Program approved by the Washington State Department of Health, so long as name of -- water riqht holder is and remains in compliance with the criteria in RCW (2). RCW may have the effect of revising the place of use of this water right. Ecoloqy. Analy-lace- of Use La17gc1age Since The Effective Date of tlie Municipal Water Law Water System Plan Review Checklist (not developed yet) Source Approval Review Checklist (not developed yet) General Process for Determining Consistency Between Water System and Watershed Plans (not developed yet) Enforcement Discretion and Municipal Water Suppliers (not developed yet) "Reasonable Due Diligence" Language for Water Rights (not developed yet) Ecology Comment Response Form (not developed yet)

9 Water Resources Program - Municipal Water Law Page 3 of 5 COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF NEW! A complaint for declaratory and injunctive relief from certain provisions of the 2003 Municipal Water Law (SESSHB 1338), was filed in King County Superior Court on September 1, Plaintiffs are Joan Burlingame, Lee Bernheisel, Scott Cornelius, Peter Knutson, Puget Sound Harvesters; Washington Environmental Council; Sierra Club; and the Center for Environmental Law and Policy. Defendants are the State of Washington, Washington State Department of Ecology, and Washington State Department of Health. a Compla~nt for Declaratory and Inlunctive Relief NEW! Request for Action Regarding the Constitutionality of the Municipal Water Law NEW! a Request for Actlon Regard~ng the Constttut~onality of the Munlclpal Water Law - Letter from the "Petitioners" o Attorney General Response to Request for Actlon Regard~ng the Const~tutlonallty of the Municipal Water Law - Maureen A. Hart, Sollcltor General a Request for Actlon Regarding the Constitutionality of the Muntc~pal Water Law - Letter from the "Trl bes" o Attorney General Response to Request for Action Regard~ng the Const~tut~onahty ofthe Munlc~pal Water Law - Maureen A. Hart, Solicitor General Municipal Water Law Section 5(2) This final draft document discusses Section 5(2) of 2E2SHB 1338, codified as RCW (2), dealing with consistency, compliance and place of use. Our intent is to use this document as we develop the Memorandum of Understanding between the Departments of Health and Ecology. A portion of the content of this document also contributed to Ecology's Municipal Water Interpretive and Policy Statement. We considered comments received from the groups listed below. Munlc~pal Water Law Sectlon 5(2) document on cons~stency, compliance and place of use 06/23/06 Comments Received The Departments of Health and Ecology received several comment s on the draft Municipal Water Law Section 5(2) document on consistency, compliance, and place of use. The agencies are jointly in the process of analyzing the comments and composing responses, which will be presented together in a single document to be released in the near future. a Center for Env~ronmental Law and Policy a King County_ Department of Natural R~sources and Parks a Olymplc Env~ronmental Council

10 Water Resources Program - Municipal Water Law Page 4 of 5 Wash~ngton Environmental Counc~l Washlngton State Assoclatlon of Countles Washlngton Water Utll~ty Counc~l Please send questions to: Doug Rushton Water Resources Program Department of Ecology POB Olympia, WA drus461@ecy.wa.gov Presentations and Information Presentat~on to the Water Resources Advisory Committee (WRAC) on the Ecology Interpret~ve and Pollcy Statement (July 17, 2006) NEW! Expla~ns the process and content of Ecology's 2003 Municipal Water Law Interpret~ve and Policy Statement. _M_un~cipajpWater Law Tr-ajn~ng - Water Conservancy Board training materials Mun~clpai Water Law Implementation - Presentation to the Washington PUD Association Water Workshop; September 28, 2005 Quick Reference 01/23/ Municipal Water IYanagement in the Water Code, Ch RCW. (Describes where sections of 2E2ESHB 1338 are codified in Ch RCW) Additional Information Sources (Links) Contacts Water Supply Adv~sory Comm~ttee Department of Ecology, Water Quallty Program, Water Reclamation aud Reuse For region-specific information about Municipal Water Northwest Region - Bellevue Counties: Island, King, Kitsap, San Juan, Skagit, Snohomish and Whatcom Paul Fabiniak Office: pfab461@ecy.waaqov Buck Smith jsmi461@ecy.wa.gov Central Region - Yakima Counties: Benton, Chelan, Douglas, Kittitas, Klickitat, Okanogan and Yakima Dan Haller Southwest Region - Lacey Counties: Clallam, Clark, Cowlitz, Grays Harbor, Jefferson, Mason, Lewis, Pacific, Pierce, Skamania, Thurston and Wahkiakum Jeff Marti Office: jema461@ecy.wa.gov Eastern Region - Spokane Counties: Adams, Asotin, Columbia, Ferry, Franklin, Garfield, Grant, Lincoln, Pend Oreille, Spokane, Stevens, Walla Walla and Whitman

11 Water Resources Program - Municipal Water Law Page 5 of 5 Off~ce: dhal46l@ecy.wa.qov I I General questions: Headquarters - Lacey Doug Rushton Off~ce: e-mall: drus461@ecy.wa.gov Victoria Leuba Office: e-mall: v!eu46l@ecy.wa,gov 1 Media contact: Headquarters - Lacey Nelsa Brodie Office: nebr46l@ecy.wa.gov Ecology Home > Water Resources Home > Water R~qht Informat~on > IYunicipal Water Law

12 "+ i i C ( ' 7 t L J L L b, I. April 2006 DOH PUB # (Revised) Water Use Efficiency Rule Overview of the Proposed Draft Rule - HOW to Get Involved Growing communities, agriculture, industry, and the importance of conserving water for fish have placed an increasing dernand on our state's water resources. To help meet these growing needs, the state legislature passed the Municipal Water Supply - Efficiency Requirelne~lts Act of 2003, better known as the Municipal Water Law. The law gives municipal water suppliers certain benefits and obligations. One of their obligations is to comply Water Use Efiicie~~cy Rule Schedule July Mail proposed rule August Public hearings August to September Review formal comments & finalize rule September Adopt rule with new state water use efficiency rules. I October Effective date 1 When final, this rule \\ill affect all municipal water suppliers. mhich includes all Group A communit>, water systems \vith 15 or more residential connections and some non-community water systems that use water in a residential manner (KCW ). The Department of Health (DOH) is making the proposed draft rule available now to give ample opportunity to stakeholders to review and prepare for our formal public comment process. 'I'he formal public comment process will begin when wc tile the rule with the Code Reviser's Oftice and mail thc rule package in mid-july. DOH cannot take public comments before the formal public process begins, and comments received prior to the formal mailing in July cannot be considered when DOH makes its final decision on the rule. Once the formal comment period is open, DOH will accept comments until the public hearings are completed in August The key elements of the proposed draft water use efficiency rule are: Mandatory requirements for water use efficiency plans and programs. A statewide standard for water distribution system leakage. Water use efficiency goals established through a public process. Annual performance reporting of total water usage. distribution system leakage, and progress toward meeting water use efticiency goals. Background A subcommittee of the Washington Water Supply Advisory Committee - including a cross-section of utilities, local governments, environmental-interest groups, business groups, state agencies, and utility customers - worked together for one year to create recommendations and options for DOH.

13 Tribal representatives also observed the process. The subcommittee's report is available on the Web at: - waterlmeeting-minutes - handouts.htm In June 2005, DOH sent out an initial draft rule and changes were made based on comments received. In addition, DO11 conducted a series oftargeted outreach sessions before and after release of the 2005 initial draft rule and solicited input at its 2004 Drinking Water seminars. Water Use Efficiency Elements Water Use Efficiency Planning, Requirements - As part of a water system plan or small water system management program, municipal water suppliers would have to collect data, forecast demand, evaluate leakage, and enact water use efficiency measures (including consideration of rate structures that encourage water use efficiency). 1-or more information about this part of the proposed draft rule, please see the Fact Sheet, Plunnrng Kequrrements (DO11 PUB ). Distribution Leakage Standard - Municipal water suppliers would be required to meet a state distribution system leakage standard in order to minimize loss of water from leakage in the distribution system. For more information about this part ofthe proposed draft rule, please see the Fact Sheet, Dr~trrhution Leakage Standard (DOH PUB ). Water Use Efficiency Goal-Setting and Performance Reporting - Municipal water suppliers would be required to set water use efficiency goals through a public process and report annually on their performance to customers and to DOH, and also make it available to the public. For more information about this part of the proposed draft rule, please see the Fact Sheet, Goal-Setting and Perfirmanee Reporting (DOH PUB ). For More Information If you have comments or questions about the proposed draft rule: please contact: Theresa Phillips. Rules Coordinator Department of llealth P.O. Box Olympia. WA Phone: Fax: theresa.phillips@doh.wa.gov Additional information can be found on the Web at: - water/municipal - water - Ia\v.htm It's Worth Saving u A Drinking Water The Department of Health is an equal opportunity agency. For persons with disabilities, this document is available on request in other formats. To submit a request. please call (TTY ). For additional copies of this publication, call This and other publications are available at http'/lwww.doh.wa.govlehpldw

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15 CERTIFICATION OF ENROLLMENT SECOND ENGROSSED SECOND SUBSTITUTE HOUSE BILL 1338 Chapter 5, Laws of th Legislature st Special Session MUNICIPAL WATER SUPPLY--EFFICIENCY REQUIREMENTS EFFECTIVE DATE: 9/9/03 Passed by the House June 5, 2003 Yeas 83 Nays 14 FRANK CHOPP Speaker of the House of Representatives Passed by the Senate June 10, 2003 Yeas 33 Nays 11 CERTIFICATE I, Cynthia Zehnder, Chief Clerk of the House of Representatives of the State of Washington, do hereby certify that the attached is SECOND ENGROSSED SECOND SUBSTITUTE HOUSE BILL 1338 as passed by the House of Representatives and the Senate on the dates hereon set forth. BRAD OWEN President of the Senate Approved June 20, CYNTHIA ZEHNDER FILED Chief Clerk June 20, :12 p.m. GARY LOCKE Governor of the State of Washington Secretary of State State of Washington

16 SECOND ENGROSSED SECOND SUBSTITUTE HOUSE BILL 1338 Passed Legislature st Special Session State of Washington 58th Legislature 2003 Regular Session By House Committee on Appropriations (originally sponsored by Representatives Linville, Kirby, Lantz, Rockefeller, Shabro, Jarrett, Grant, Quall, Hunt, Delvin, Wallace, Woods, Benson, Morris and Conway; by request of Governor Locke) READ FIRST TIME 03/10/03. 1 AN ACT Relating to certainty and flexibility of municipal water 2 rights and efficient use of water; amending RCW , , , , , , , and A.110; 4 adding new sections to chapter RCW; adding a new section to 5 chapter A RCW; adding a new section to chapter RCW; adding 6 a new section to chapter RCW; and adding a new section to chapter RCW. 8 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON: 9 Sec. 1. RCW and 1987 c 109 s 65 are each amended to read 10 as follows: 11 ((As used in this chapter:)) The definitions in this section apply 12 throughout this chapter unless the context clearly requires otherwise. 13 (1) "Department" means the department of ecology((;)). 14 (2) "Director" means the director of ecology((; and)). 15 (3) "Municipal water supplier" means an entity that supplies water 16 for municipal water supply purposes. 17 (4) "Municipal water supply purposes" means a beneficial use of 18 water: (a) For residential purposes through fifteen or more 19 residential service connections or for providing residential use of p. 1 2E2SHB 1338.SL

17 1 water for a nonresidential population that is, on average, at least 2 twenty-five people for at least sixty days a year; (b) for governmental 3 or governmental proprietary purposes by a city, town, public utility 4 district, county, sewer district, or water district; or (c) indirectly 5 for the purposes in (a) or (b) of this subsection through the delivery 6 of treated or raw water to a public water system for such use. If 7 water is beneficially used under a water right for the purposes listed 8 in (a), (b), or (c) of this subsection, any other beneficial use of 9 water under the right generally associated with the use of water within 10 a municipality is also for "municipal water supply purposes," 11 including, but not limited to, beneficial use for commercial, 12 industrial, irrigation of parks and open spaces, institutional, 13 landscaping, fire flow, water system maintenance and repair, or related 14 purposes. If a governmental entity holds a water right that is for the 15 purposes listed in (a), (b), or (c) of this subsection, its use of 16 water or its delivery of water for any other beneficial use generally 17 associated with the use of water within a municipality is also for 18 "municipal water supply purposes," including, but not limited to, 19 beneficial use for commercial, industrial, irrigation of parks and open 20 spaces, institutional, landscaping, fire flow, water system maintenance 21 and repair, or related purposes. 22 (5) "Person" means any firm, association, water users' association, 23 corporation, irrigation district, or municipal corporation, as well as 24 an individual. 25 NEW SECTION. Sec. 2. A new section is added to chapter RCW 26 to read as follows: 27 Beneficial uses of water under a municipal water supply purposes 28 water right may include water withdrawn or diverted under such a right 29 and used for: 30 (1) Uses that benefit fish and wildlife, water quality, or other 31 instream resources or related habitat values; or 32 (2) Uses that are needed to implement environmental obligations 33 called for by a watershed plan approved under chapter RCW, or a 34 comprehensive watershed plan adopted under RCW (1) after the 35 effective date of this section, a federally approved habitat 36 conservation plan prepared in response to the listing of a species as 37 being endangered or threatened under the federal endangered species 2E2SHB 1338.SL p. 2

18 1 act, 16 U.S.C. Sec et seq., a hydropower license of the federal 2 energy regulatory commission, or a comprehensive irrigation district 3 management plan. 4 NEW SECTION. Sec. 3. A new section is added to chapter RCW 5 to read as follows: 6 When requested by a municipal water supplier or when processing a 7 change or amendment to the right, the department shall amend the water 8 right documents and related records to ensure that water rights that 9 are for municipal water supply purposes, as defined in RCW , 10 are correctly identified as being for municipal water supply purposes. 11 This section authorizes a water right or portion of a water right held 12 or acquired by a municipal water supplier that is for municipal water 13 supply purposes as defined in RCW to be identified as being 14 a water right for municipal water supply purposes. However, it does 15 not authorize any other water right or other portion of a right held or 16 acquired by a municipal water supplier to be so identified without the 17 approval of a change or transfer of the right or portion of the right 18 for such a purpose. 19 Sec. 4. RCW and 1987 c 109 s 84 are each amended to read 20 as follows: 21 (1) Each application for permit to appropriate water shall set 22 forth the name and post office address of the applicant, the source of 23 water supply, the nature and amount of the proposed use, the time 24 during which water will be required each year, the location and 25 description of the proposed ditch, canal, or other work, the time 26 within which the completion of the construction and the time for the 27 complete application of the water to the proposed use. 28 (2) If for agricultural purposes, ((it)) the application shall give 29 the legal subdivision of the land and the acreage to be irrigated, as 30 near as may be, and the amount of water expressed in acre feet to be 31 supplied per season. If for power purposes, it shall give the nature 32 of the works by means of which the power is to be developed, the head 33 and amount of water to be utilized, and the uses to which the power is 34 to be applied. 35 (3) If for construction of a reservoir, ((it)) the application p. 3 2E2SHB 1338.SL

19 1 shall give the height of the dam, the capacity of the reservoir, and 2 the uses to be made of the impounded waters. 3 (4) If for community or multiple domestic water supply, the 4 application shall give the projected number of service connections 5 sought to be served. However, for a municipal water supplier that has 6 an approved water system plan under chapter RCW or an approval 7 from the department of health to serve a specified number of service 8 connections, the service connection figure in the application or any 9 subsequent water right document is not an attribute limiting exercise 10 of the water right as long as the number of service connections to be 11 served under the right is consistent with the approved water system 12 plan or specified number. 13 (5) If for municipal water supply, ((it)) the application shall 14 give the present population to be served, and, as near as may be 15 estimated, the future requirement of the municipality. However, for a 16 municipal water supplier that has an approved water system plan under 17 chapter RCW or an approval from the department of health to serve 18 a specified number of service connections, the population figures in 19 the application or any subsequent water right document are not an 20 attribute limiting exercise of the water right as long as the 21 population to be provided water under the right is consistent with the 22 approved water system plan or specified number. 23 (6) If for mining purposes, ((it)) the application shall give the 24 nature of the mines to be served and the method of supplying and 25 utilizing the water; also their location by legal subdivisions. 26 (7) All applications shall be accompanied by such maps and 27 drawings, in duplicate, and such other data, as may be required by the 28 department, and such accompanying data shall be considered as a part of 29 the application. 30 Sec. 5. RCW and 1991 c 350 s 2 are each amended to read 31 as follows: 32 (1) Within service areas established pursuant to chapter((s)) ((and)) or RCW, the department of ecology and the department of 34 health shall coordinate approval procedures to ensure compliance and 35 consistency with the approved water system plan or small water system 36 management program. 2E2SHB 1338.SL p. 4

20 1 (2) The effect of the department of health's approval of a planning 2 or engineering document that describes a municipal water supplier's 3 service area under chapter RCW, or the local legislative 4 authority's approval of service area boundaries in accordance with 5 procedures adopted pursuant to chapter RCW, is that the place of 6 use of a surface water right or ground water right used by the supplier 7 includes any portion of the approved service area that was not 8 previously within the place of use for the water right if the supplier 9 is in compliance with the terms of the water system plan or small water 10 system management program, including those regarding water 11 conservation, and the alteration of the place of use is not 12 inconsistent, regarding an area added to the place of use, with: Any 13 comprehensive plans or development regulations adopted under chapter A RCW; any other applicable comprehensive plan, land use plan, or 15 development regulation adopted by a city, town, or county; or any 16 watershed plan approved under chapter RCW, or a comprehensive 17 watershed plan adopted under RCW (1) after the effective date 18 of this section, if such a watershed plan has been approved for the 19 area. 20 (3) A municipal water supplier must implement cost-effective water 21 conservation in accordance with the requirements of section 7 of this 22 act as part of its approved water system plan or small water system 23 management program. In preparing its regular water system plan update, 24 a municipal water supplier with one thousand or more service 25 connections must describe: (a) The projects, technologies, and other 26 cost-effective measures that comprise its water conservation program; 27 (b) improvements in the efficiency of water system use resulting from 28 implementation of its conservation program over the previous six years; 29 and (c) projected effects of delaying the use of existing inchoate 30 rights over the next six years through the addition of further cost- 31 effective water conservation measures before it may divert or withdraw 32 further amounts of its inchoate right for beneficial use. When 33 establishing or extending a surface or ground water right construction 34 schedule under RCW , the department must take into 35 consideration the public water system's use of conserved water. 36 Sec. 6. RCW and 1987 c 109 s 89 are each amended to read 37 as follows: p. 5 2E2SHB 1338.SL

21 1 (1) Upon a showing satisfactory to the department that any 2 appropriation has been perfected in accordance with the provisions of 3 this chapter, it shall be the duty of the department to issue to the 4 applicant a certificate stating such facts in a form to be prescribed 5 by ((him)) the director, and such certificate shall thereupon be 6 recorded with the department. Any original water right certificate 7 issued, as provided by this chapter, shall be recorded with the 8 department and thereafter, at the expense of the party receiving the 9 same, be transmitted by the department ((transmitted)) to the county 10 auditor of the county or counties where the distributing system or any 11 part thereof is located, and be recorded in the office of such county 12 auditor, and thereafter be transmitted to the owner thereof. 13 (2) Except as provided for the issuance of certificates under RCW and for the issuance of certificates following the approval 15 of a change, transfer, or amendment under RCW or , 16 the department shall not revoke or diminish a certificate for a surface 17 or ground water right for municipal water supply purposes as defined in 18 RCW unless the certificate was issued with ministerial errors 19 or was obtained through misrepresentation. The department may adjust 20 such a certificate under this subsection if ministerial errors are 21 discovered, but only to the extent necessary to correct the ministerial 22 errors. The department may diminish the right represented by such a 23 certificate if the certificate was obtained through a misrepresentation 24 on the part of the applicant or permit holder, but only to the extent 25 of the misrepresentation. The authority provided by this subsection 26 does not include revoking, diminishing, or adjusting a certificate 27 based on any change in policy regarding the issuance of such 28 certificates that has occurred since the certificate was issued. This 29 subsection may not be construed as providing any authority to the 30 department to revoke, diminish, or adjust any other water right. 31 (3) This subsection applies to the water right represented by a 32 water right certificate issued prior to the effective date of this 33 section for municipal water supply purposes as defined in RCW where the certificate was issued based on an administrative policy for 35 issuing such certificates once works for diverting or withdrawing and 36 distributing water for municipal supply purposes were constructed 37 rather than after the water had been placed to actual beneficial use. 38 Such a water right is a right in good standing. 2E2SHB 1338.SL p. 6

22 1 (4) After the effective date of this section, the department must 2 issue a new certificate under subsection (1) of this section for a 3 water right represented by a water right permit only for the perfected 4 portion of a water right as demonstrated through actual beneficial use 5 of water. 6 NEW SECTION. Sec. 7. A new section is added to chapter A 7 RCW to read as follows: 8 (1) It is the intent of the legislature that the department 9 establish water use efficiency requirements designed to ensure 10 efficient use of water while maintaining water system financial 11 viability, improving affordability of supplies, and enhancing system 12 reliability. 13 (2) The requirements of this section shall apply to all municipal 14 water suppliers and shall be tailored to be appropriate to system size, 15 forecasted system demand, and system supply characteristics. 16 (3) For the purposes of this section: 17 (a) Water use efficiency includes conservation planning 18 requirements, water distribution system leakage standards, and water 19 conservation performance reporting requirements; and 20 (b) "Municipal water supplier" and "municipal water supply 21 purposes" have the meanings provided by RCW (4) To accomplish the purposes of this section, the department 23 shall adopt rules necessary to implement this section by December 31, The department shall: 25 (a) Develop conservation planning requirements that ensure 26 municipal water suppliers are: (i) Implementing programs to integrate 27 conservation with water system operation and management; and (ii) 28 identifying how to appropriately fund and implement conservation 29 activities. Requirements shall apply to the conservation element of 30 water system plans and small water system management programs developed 31 pursuant to chapter RCW. In establishing the conservation 32 planning requirements the department shall review the current 33 department conservation planning guidelines and include those elements 34 that are appropriate for rule. Conservation planning requirements 35 shall include but not be limited to: 36 (A) Selection of cost-effective measures to achieve a system's p. 7 2E2SHB 1338.SL

23 1 water conservation objectives. Requirements shall allow the municipal 2 water supplier to select and schedule implementation of the best 3 methods for achieving its conservation objectives; 4 (B) Evaluation of the feasibility of adopting and implementing 5 water delivery rate structures that encourage water conservation; 6 (C) Evaluation of each system's water distribution system leakage 7 and, if necessary, identification of steps necessary for achieving 8 water distribution system leakage standards developed under (b) of this 9 subsection; 10 (D) Collection and reporting of water consumption and source 11 production and/or water purchase data. Data collection and reporting 12 requirements shall be sufficient to identify water use patterns among 13 utility customer classes, where applicable, and evaluate the 14 effectiveness of each system's conservation program. Requirements, 15 including reporting frequency, shall be appropriate to system size and 16 complexity. Reports shall be available to the public; and 17 (E) Establishment of minimum requirements for water demand forecast 18 methodologies such that demand forecasts prepared by municipal water 19 suppliers are sufficient for use in determining reasonably anticipated 20 future water needs; 21 (b) Develop water distribution system leakage standards to ensure 22 that municipal water suppliers are taking appropriate steps to reduce 23 water system leakage rates or are maintaining their water distribution 24 systems in a condition that results in leakage rates in compliance with 25 the standards. Limits shall be developed in terms of percentage of 26 total water produced and/or purchased and shall not be lower than ten 27 percent. The department may consider alternatives to the percentage of 28 total water supplied where alternatives provide a better evaluation of 29 the water system's leakage performance. The department shall institute 30 a graduated system of requirements based on levels of water system 31 leakage. A municipal water supplier shall select one or more control 32 methods appropriate for addressing leakage in its water system; 33 (c) Establish minimum requirements for water conservation 34 performance reporting to assure that municipal water suppliers are 35 regularly evaluating and reporting their water conservation 36 performance. The objective of setting conservation goals is to enhance 37 the efficient use of water by the water system customers. Performance 38 reporting shall include: 2E2SHB 1338.SL p. 8

24 1 (i) Requirements that municipal water suppliers adopt and achieve 2 water conservation goals. The elected governing board or governing 3 body of the water system shall set water conservation goals for the 4 system. In setting water conservation goals the water supplier may 5 consider historic conservation performance and conservation investment, 6 customer base demographics, regional climate variations, forecasted 7 demand and system supply characteristics, system financial viability, 8 system reliability, and affordability of water rates. Conservation 9 goals shall be established by the municipal water supplier in an open 10 public forum; 11 (ii) Requirements that the municipal water supplier adopt schedules 12 for implementing conservation program elements and achieving 13 conservation goals to ensure that progress is being made toward adopted 14 conservation goals; 15 (iii) A reporting system for regular reviews of conservation 16 performance against adopted goals. Performance reports shall be 17 available to customers and the public. Requirements, including 18 reporting frequency, shall be appropriate to system size and 19 complexity; 20 (iv) Requirements that any system not meeting its water 21 conservation goals shall develop a plan for modifying its conservation 22 program to achieve its goals along with procedures for reporting 23 performance to the department; 24 (v) If a municipal water supplier determines that further 25 reductions in consumption are not reasonably achievable, it shall 26 identify how current consumption levels will be maintained; 27 (d) Adopt rules that, to the maximum extent practical, utilize 28 existing mechanisms and simplified procedures in order to minimize the 29 cost and complexity of implementation and to avoid placing unreasonable 30 financial burden on smaller municipal systems. 31 (5) The department shall establish an advisory committee to assist 32 the department in developing rules for water use efficiency. The 33 advisory committee shall include representatives from public water 34 system customers, environmental interest groups, business interest 35 groups, a representative cross-section of municipal water suppliers, a 36 water utility conservation professional, tribal governments, the 37 department of ecology, and any other members determined necessary by 38 the department. The department may use the water supply advisory p. 9 2E2SHB 1338.SL

25 1 committee created pursuant to RCW A.160 augmented with additional 2 participants as necessary to comply with this subsection to assist the 3 department in developing rules. 4 (6) The department shall provide technical assistance upon request 5 to municipal water suppliers and local governments regarding water 6 conservation, which may include development of best management 7 practices for water conservation programs, conservation landscape 8 ordinances, conservation rate structures for public water systems, and 9 general public education programs on water conservation. 10 (7) To ensure compliance with this section, the department shall 11 establish a compliance process that incorporates a graduated approach 12 employing the full range of compliance mechanisms available to the 13 department. 14 (8) Prior to completion of rule making required in subsection (4) 15 of this section, municipal water suppliers shall continue to meet the 16 existing conservation requirements of the department and shall continue 17 to implement their current water conservation programs. 18 NEW SECTION. Sec. 8. A new section is added to chapter RCW 19 to read as follows: 20 In approving the water system plan of a public water system, the 21 department shall ensure that water service to be provided by the system 22 under the plan for any new industrial, commercial, or residential use 23 is consistent with the requirements of any comprehensive plans or 24 development regulations adopted under chapter 36.70A RCW or any other 25 applicable comprehensive plan, land use plan, or development regulation 26 adopted by a city, town, or county for the service area. A municipal 27 water supplier, as defined in RCW , has a duty to provide 28 retail water service within its retail service area if: (1) Its 29 service can be available in a timely and reasonable manner; (2) the 30 municipal water supplier has sufficient water rights to provide the 31 service; (3) the municipal water supplier has sufficient capacity to 32 serve the water in a safe and reliable manner as determined by the 33 department of health; and (4) it is consistent with the requirements of 34 any comprehensive plans or development regulations adopted under 35 chapter 36.70A RCW or any other applicable comprehensive plan, land use 36 plan, or development regulation adopted by a city, town, or county for 2E2SHB 1338.SL p. 10

26 1 the service area and, for water service by the water utility of a city 2 or town, with the utility service extension ordinances of the city or 3 town. 4 NEW SECTION. Sec. 9. A new section is added to chapter RCW 5 to read as follows: 6 (1) The timelines and interim milestones in a detailed 7 implementation plan required by section 3, chapter... (Engrossed 8 Second Substitute House Bill No. 1336), Laws of 2003 must address the 9 planned future use of existing water rights for municipal water supply 10 purposes, as defined in RCW , that are inchoate, including how 11 these rights will be used to meet the projected future needs identified 12 in the watershed plan, and how the use of these rights will be 13 addressed when implementing instream flow strategies identified in the 14 watershed plan. 15 (2) The watershed planning unit or other authorized lead agency 16 shall ensure that holders of water rights for municipal water supply 17 purposes not currently in use are asked to participate in defining the 18 timelines and interim milestones to be included in the detailed 19 implementation plan. 20 (3) The department of health shall annually compile a list of water 21 system plans and plan updates to be reviewed by the department during 22 the coming year and shall consult with the departments of community, 23 trade, and economic development, ecology, and fish and wildlife to: 24 (a) Identify watersheds where further coordination is needed between 25 water system planning and local watershed planning under this chapter; 26 and (b) develop a work plan for conducting the necessary coordination. 27 NEW SECTION. Sec. 10. A new section is added to chapter RCW 28 to read as follows: 29 The department shall prioritize the expenditure of funds and other 30 resources for programs related to streamflow restoration in watersheds 31 where the exercise of inchoate water rights may have a larger effect on 32 streamflows and other water uses. 33 Sec. 11. RCW and 1989 c 348 s 10 are each amended to 34 read as follows: 35 The department of ecology shall require sewer plans to include a p. 11 2E2SHB 1338.SL

27 1 discussion of water conservation measures considered or underway that 2 would reduce flows to the sewerage system and an analysis of their 3 anticipated impact on public sewer service and treatment capacity. 4 Sec. 12. RCW and 1997 c 444 s 9 are each amended to read 5 as follows: 6 The evaluation of any plans submitted under RCW must 7 include consideration of opportunities for the use of reclaimed water 8 as defined in RCW Wastewater plans submitted under RCW must include a statement describing how applicable 10 reclamation and reuse elements will be coordinated as required under 11 RCW (2). 12 Sec. 13. RCW and 1997 c 444 s 1 are each amended to read 13 as follows: 14 (1) The owner of a wastewater treatment facility that is reclaiming 15 water with a permit issued under this chapter has the exclusive right 16 to any reclaimed water generated by the wastewater treatment facility. 17 Use and distribution of the reclaimed water by the owner of the 18 wastewater treatment facility is exempt from the permit requirements of 19 RCW and Revenues derived from the reclaimed water 20 facility shall be used only to offset the cost of operation of the 21 wastewater utility fund or other applicable source of system-wide 22 funding. 23 (2) If the proposed use or uses of reclaimed water are intended to 24 augment or replace potable water supplies or create the potential for 25 the development of additional potable water supplies, such use or uses 26 shall be considered in the development of the regional water supply 27 plan or plans addressing potable water supply service by multiple water 28 purveyors. The owner of a wastewater treatment facility that proposes 29 to reclaim water shall be included as a participant in the development 30 of such regional water supply plan or plans. 31 (3) Where opportunities for the use of reclaimed water exist within 32 the period of time addressed by a water supply plan or coordinated 33 water system plan developed under chapter or RCW, these 34 plans must be developed and coordinated to ensure that opportunities 35 for reclaimed water are evaluated. The requirements of this subsection 2E2SHB 1338.SL p. 12

28 1 (3) do not apply to water system plans developed under chapter RCW for utilities serving less than one thousand service connections. 3 NEW SECTION. Sec. 14. A new section is added to chapter RCW 4 to read as follows: 5 (1) An unperfected surface water right for municipal water supply 6 purposes or a portion thereof held by a municipal water supplier may be 7 changed or transferred in the same manner as provided by RCW for any purpose if: 9 (a) The supplier is in compliance with the terms of an approved 10 water system plan or small water system management program under 11 chapter or RCW that applies to the supplier, including 12 those regarding water conservation; 13 (b) Instream flows have been established by rule for the water 14 resource inventory area, as established in chapter WAC as it 15 exists on the effective date of this section, that is the source of the 16 water for the transfer or change; 17 (c) A watershed plan has been approved for the water resource 18 inventory area referred to in (b) of this subsection under chapter RCW and a detailed implementation plan has been completed that 20 satisfies the requirements of section 3, chapter..., Laws of (section 3, Engrossed Second Substitute House Bill No. 1336) or a 22 watershed plan has been adopted after the effective date of this 23 section for that water resource inventory area under RCW (1) 24 and a detailed implementation plan has been completed that satisfies 25 the requirements of section 3, chapter..., Laws of 2003 (section 3, 26 Engrossed Second Substitute House Bill No. 1336); and 27 (d) Stream flows that satisfy the instream flows referred to in (b) 28 of this subsection are met or the milestones for satisfying those 29 instream flows required under (c) of this subsection are being met. 30 (2) If the criteria listed in subsection (1)(a) through (d) of this 31 section are not satisfied, an unperfected surface water right for 32 municipal water supply purposes or a portion thereof held by a 33 municipal water supplier may nonetheless be changed or transferred in 34 the same manner as provided by RCW if the change or transfer 35 is: 36 (a) To provide water for an instream flow requirement that has been 37 established by the department by rule; p. 13 2E2SHB 1338.SL

29 1 (b) Subject to stream flow protection or restoration requirements 2 contained in: A federally approved habitat conservation plan under the 3 federal endangered species act, 16 U.S.C. Sec et seq., a 4 hydropower license of the federal energy regulatory commission, or a 5 watershed agreement established under section 16 of this act; 6 (c) For a water right that is subject to instream flow requirements 7 or agreements with the department and the change or transfer is also 8 subject to those instream flow requirements or agreements; or 9 (d) For resolving or alleviating a public health or safety 10 emergency caused by a failing public water supply system currently 11 providing potable water to existing users, as such a system is 12 described in section 15 of this act, and if the change, transfer, or 13 amendment is for correcting the actual or anticipated cause or causes 14 of the public water system failure. Inadequate water rights for a 15 public water system to serve existing hookups or to accommodate future 16 population growth or other future uses do not constitute a public 17 health or safety emergency. 18 (3) If the recipient of water under a change or transfer authorized 19 by subsection (1) of this section is a water supply system, the 20 receiving system must also be in compliance with the terms of an 21 approved water system plan or small water system management program 22 under chapter or RCW that applies to the system, including 23 those regarding water conservation. 24 (4) The department must provide notice to affected tribes of any 25 transfer or change proposed under this section. 26 NEW SECTION. Sec. 15. A new section is added to chapter RCW 27 to read as follows: 28 To be considered a failing public water system for the purposes of 29 section 14 of this act, the department of health, in consultation with 30 the department and the local health authority, must make a 31 determination that the system meets one or more of the following 32 conditions: 33 (1) A public water system has failed, or is in danger of failing 34 within two years, to meet state board of health standards for the 35 delivery of potable water to existing users in adequate quantity or 36 quality to meet basic human drinking, cooking, and sanitation needs or 37 to provide adequate fire protection flows; 2E2SHB 1338.SL p. 14

30 1 (2) The current water source has failed or will fail so that the 2 public water system is or will become incapable of exercising its 3 existing water rights to meet existing needs for drinking, cooking, and 4 sanitation purposes after all reasonable conservation efforts have been 5 implemented; or 6 (3) A change in source is required to meet drinking water quality 7 standards and avoid unreasonable treatment costs, or the state 8 department of health determines that the existing source of supply is 9 unacceptable for human use. 10 NEW SECTION. Sec. 16. A new section is added to chapter RCW 11 to read as follows: 12 (1) On a pilot project basis, the department may enter into a 13 watershed agreement with one or more municipal water suppliers in water 14 resource inventory area number one to meet the objectives established 15 in a water resource management program approved or being developed 16 under chapter RCW with the consent of the initiating governments 17 of the water resource inventory area. The term of an agreement may not 18 exceed ten years, but the agreement may be renewed or amended upon 19 agreement of the parties. 20 (2) A watershed agreement must be consistent with: 21 (a) Growth management plans developed under chapter 36.70A RCW 22 where these plans are adopted and in effect; 23 (b) Water supply plans and small water system management programs 24 approved under chapter or RCW; 25 (c) Coordinated water supply plans approved under chapter RCW; and 27 (d) Water use efficiency and conservation requirements and 28 standards established by the state department of health or such 29 requirements and standards as are provided in an approved watershed 30 plan, whichever are the more stringent. 31 (3) A watershed agreement must: 32 (a) Require the public water system operated by the participating 33 municipal water supplier to meet obligations under the watershed plan; 34 (b) Establish performance measures and timelines for measures to be 35 completed; 36 (c) Provide for monitoring of stream flows and metering of water 37 use as needed to ensure that the terms of the agreement are met; and p. 15 2E2SHB 1338.SL

31 1 (d) Require annual reports from the water users regarding 2 performance under the agreement. 3 (4) As needed to implement watershed agreement activities, the 4 department may provide or receive funding, or both, under its existing 5 authorities. 6 (5) The department must provide opportunity for public review of a 7 proposed agreement before it is executed. The department must make 8 proposed and executed watershed agreements and annual reports available 9 on the department's internet web site. 10 (6) The department must consult with affected local governments and 11 the state departments of health and fish and wildlife before executing 12 an agreement. 13 (7) Before executing a watershed agreement, the department must 14 conduct a government-to-government consultation with affected tribal 15 governments. The municipal water suppliers operating the public water 16 systems that are proposing to enter into the agreements must be invited 17 to participate in the consultations. During these consultations, the 18 department and the municipal water suppliers shall explore the 19 potential interest of the tribal governments or governments in 20 participating in the agreement. 21 (8) Any person aggrieved by the department's failure to satisfy the 22 requirements in subsection (3) of this section as embodied in the 23 department's decision to enter into a watershed agreement under this 24 section may, within thirty days of the execution of such an agreement, 25 appeal the department's decision to the pollution control hearings 26 board under chapter 43.21B RCW. 27 (9) Any projects implemented by a municipal water system under the 28 terms of an agreement reached under this section may be continued and 29 maintained by the municipal water system after the agreement expires or 30 is terminated as long as the conditions of the agreement under which 31 they were implemented continue to be met. 32 (10) Before December 31, 2003, and December 31, 2004, the 33 department must report to the appropriate committees of the legislature 34 the results of the pilot project provided for in this section. Based 35 on the experience of the pilot project, the department must offer any 36 suggested changes in law that would improve, facilitate, and maximize 37 the implementation of watershed plans adopted under this chapter. 2E2SHB 1338.SL p. 16

32 1 NEW SECTION. Sec. 17. A new section is added to chapter RCW 2 to read as follows: 3 The department may not enter into new watershed agreements under 4 section 16 of this act after July 1, This section does not apply 5 to the renewal of agreements in effect prior to that date. 6 Sec. 18. RCW A.110 and 1991 c 304 s 5 are each amended to 7 read as follows: 8 (1) No person may operate a group A public water system unless the 9 person first submits an application to the department and receives an 10 operating permit as provided in this section. A new application must 11 be submitted upon any change in ownership of the system. Any person 12 operating a public water system on July 28, 1991, may continue to 13 operate the system until the department takes final action, including 14 any time necessary for a hearing under subsection (3) of this section, 15 on a permit application submitted by the person operating the system 16 under the rules adopted by the department to implement this section. 17 (2) The department may require that each application include the 18 information that is reasonable and necessary to determine that the 19 system complies with applicable standards and requirements of the 20 federal safe drinking water act, state law, and rules adopted by the 21 department or by the state board of health. 22 (3) Following its review of the application, its supporting 23 material, and any information received by the department in its 24 investigation of the application, the department shall issue or deny 25 the operating permit. The department shall act on initial permit 26 applications as expeditiously as possible, and shall in all cases 27 either grant or deny the application within one hundred twenty days of 28 receipt of the application or of any supplemental information required 29 to complete the application. The applicant for a permit shall be 30 entitled to file an appeal in accordance with chapter RCW if the 31 department denies the initial or subsequent applications or imposes 32 conditions or requirements upon the operator. Any operator of a public 33 water system that requests a hearing may continue to operate the system 34 until a decision is issued after the hearing. 35 (4) At the time of initial permit application or at the time of 36 permit renewal the department may impose such permit conditions, p. 17 2E2SHB 1338.SL

33 1 requirements for system improvements, and compliance schedules as it 2 determines are reasonable and necessary to ensure that the system will 3 provide a safe and reliable water supply to its users. 4 (5) Operating permits shall be issued for a term of one year, and 5 shall be renewed annually, unless the operator fails to apply for a new 6 permit or the department finds good cause to deny the application for 7 renewal. 8 (6) Each application shall be accompanied by an annual fee as 9 follows: 10 (a) The annual fee for public water supply systems serving fifteen 11 to forty-nine service connections shall be twenty-five dollars. 12 (b) The annual fee for public water supply systems serving fifty to 13 three thousand three hundred thirty-three service connections shall be 14 based on a uniform per service connection fee of one dollar and fifty 15 cents per service connection. 16 (c) The annual fee for public water supply systems serving three 17 thousand three hundred thirty-four to fifty-three thousand three 18 hundred thirty-three service connections shall be based on a uniform 19 per service connection fee of one dollar and fifty cents per service 20 connection plus ten cents for each service connection in excess of 21 three thousand three hundred thirty-three service connections. 22 (d) The annual fee for public water supply systems serving fifty- 23 three thousand three hundred thirty-four or more service connections 24 shall be ten thousand dollars. 25 (e) In addition to the fees under (a) through (d) of this 26 subsection, the department may charge an additional one-time fee of 27 five dollars for each service connection in a new water system. 28 (f) Until June 30, 2007, in addition to the fees under (a) through 29 (e) of this subsection, the department may charge municipal water 30 suppliers, as defined in RCW , an additional annual fee 31 equivalent to twenty-five cents for each residential service connection 32 for the purpose of funding the water conservation activities in section 33 7 of this act. 34 (7) The department may phase-in the implementation for any group of 35 systems provided the schedule for implementation is established by 36 rule. Prior to implementing the operating permit requirement on water 37 systems having less than five hundred service connections, the 38 department shall form a committee composed of persons operating these 2E2SHB 1338.SL p. 18

34 1 systems. The committee shall be composed of the department of health, 2 two operators of water systems having under one hundred connections, 3 two operators of water systems having between one hundred and two 4 hundred service connections, two operators of water systems having 5 between two hundred and three hundred service connections, two 6 operators of water systems having between three hundred and four 7 hundred service connections, two operators of water systems having 8 between four hundred and five hundred service connections, and two 9 county public health officials. The members shall be chosen from 10 different geographic regions of the state. This committee shall 11 develop draft rules to implement this section. The draft rules will 12 then be subject to the rule-making procedures in accordance with 13 chapter RCW. 14 (8) The department shall notify existing public water systems of 15 the requirements of RCW A.030, A.060, and this section at 16 least one hundred twenty days prior to the date that an application for 17 a permit is required pursuant to RCW A.030, A.060, and this 18 section. 19 (9) The department shall issue one operating permit to any approved 20 satellite system management agency. Operating permit fees for approved 21 satellite system management agencies shall be one dollar per connection 22 per year for the total number of connections under the management of 23 the approved satellite agency. The department shall define by rule the 24 meaning of the term "satellite system management agency." If a 25 statutory definition of this term exists, then the department shall 26 adopt by rule a definition consistent with the statutory definition. 27 (10) For purposes of this section, "group A public water system" 28 and "system" mean those water systems with fifteen or more service 29 connections, regardless of the number of people; or a system serving an 30 average of twenty-five or more people per day for sixty or more days 31 within a calendar year, regardless of the number of service 32 connections. 33 NEW SECTION. Sec. 19. If any provision of this act or its 34 application to any person or circumstance is held invalid, the 35 remainder of the act or the application of the provision to other p. 19 2E2SHB 1338.SL

35 1 persons or circumstances is not affected. Passed by the House June 5, Passed by the Senate June 10, Approved by the Governor June 20, Filed in Office of Secretary of State June 20, E2SHB 1338.SL p. 20

36 June 8, 2006 Via Federal Express Rob McKenna Attorney General of Washington 1125 Washington Street S.E. P.O. Box Olympia, WA RE: Request for Action Regarding the Constitutionality of the Municipal Water Law Dear Mr. McKenna: In accordance with the Washington Supreme Court s procedures for taxpayer actions, Joan Burlingame and Scott Cornelius, (the Junior Water Right Holders ), Pete Knutson and the Puget Sound Harvesters (the Fishers ), and the Washington Environmental Council, Sierra Club, and Center for Environmental Law and Policy (the Conservation Organizations ) (collectively, the Petitioners ), on their own behalf and on behalf of all taxpayers of the State of Washington, hereby request that you take action to invalidate certain unconstitutional provisions of SESSHB 1338 (2003), the Municipal Water Law ( MWL ). This letter echoes many of the issues raised in a previous request for action sent to you on May 22, 2006, by the Hoh Tribe, Jamestown S Klallam Tribe, Lummi Nation, Makah Indian Nation, Squaxin Island Tribe, Suquamish Tribe, Swinomish Tribe, Tulalip Tribes, Quinault Indian Nation, and Yakama Indian Nation. The unconstitutional provisions of the MWL retroactively expand some water rights to the detriment of all others. The Petitioners assert that these provisions violate the Due Process Clauses of the U.S. and Washington Constitutions and the doctrine of the separation of powers. We describe below the Petitioners interests, the MWL, and the constitutional violations that warrant legal action. The Petitioners believe that there are solutions to water management in Washington that do not jeopardize existing rights and existing flows and would welcome the opportunity to discuss the issues raised by this letter. INTERESTS OF PETITIONERS The Junior Water Right Holders hold water rights that are junior to some of the water rights retroactively expanded by the MWL. Therefore, their water rights will be impaired by the expansion of those senior water rights. For example, Joan Burlingame is a rural property owner and farmer near Ravensdale in King County. She raises horses, sheep, and chickens. She has

37 Rob McKenna June 8, 2006 Page 2 lived there for 25 years and during that time, as development has encroached upon her property, she has seen a drastic decline in the water available in her well. Sometimes, her well goes dry. She can no longer irrigate her vegetable garden or fruit trees with well water, and she often has insufficient water for cooking, laundry, and bathing. Creeks near her property have suffered from diminished flows, impairing fish habitat and instream values. Scott Cornelius has a well in Pullman. His well draws from the same aquifer as at least two wells that belong to Washington State University. WSU is attempting to consolidate several of its water rights. This will allow the university to pump more water than it was entitled to before the passage of the MWL. Among the projects that WSU has planned for its water is a new golf course. The aquifer shared by Mr. Cornelius and WSU has been declining for years. WSU s expanded water use will only accelerate this decline, harming Mr. Cornelius and all other users of the aquifer. The Fishers rely on adequate instream flows to support the healthy salmon runs on which they rely for their livelihoods. Pete Knutson is a commercial fisherman who works out of Fishermen s Terminal in Seattle. He has been a fisherman for more than 30 years and currently fishes in Puget Sound and off the coast of Alaska. He is an elected commissioner of the Puget Sound Salmon Commission, representing 210 family fishing businesses. Mr. Knutson is also President of the Puget Sound Harvesters, a non-profit organization that represents the interests of gillnet fishermen who work in the waters of Puget Sound. The retroactive expansion of water rights by the MWL threatens instream flows, wild salmon populations, and the livelihoods of the fishermen who depend on them. The Conservation Organizations and their members have aesthetic, recreational, fishing, and wildlife protection interests in the surface waters of the State of Washington and, in particular, in instream flows that have been established by rule by the Department of Ecology. See RCW ; RCW These instream flows are junior to many of the water rights that have been retroactively expanded by the MWL and thus the public s interest and the Conservation Organizations interests in these instream flows have been impaired by the MWL. WATER LAW BACKGROUND Fresh water in Washington is a precious and limited resource. This fact may be easy to forget, particularly in the western part of the state and after one of the wettest winters on record. Yet many of the state s surface- and ground-waters are stretched to their limits. Indeed, in many years, some streams and even major rivers, such as the Walla Walla River, run dry. In many other rivers, there is so little water during the summer months that established instream flows are not met, harming fish, wildlife, and recreational opportunities. Many fish species that depend on our streams and rivers are on the brink of extinction. The MWL will only exacerbate these problems. Washington, like other western states, has based its Water Law primarily on the doctrine of prior appropriation. The prior appropriation system depends primarily on when someone

38 Rob McKenna June 8, 2006 Page 3 stakes a claim to the use of a given quantity of water. Starting in the nineteenth century, anyone in Washington could claim a right to take water from a river or stream by merely posting a notice on a tree. In fact, one could divert the water without even posting a notice. When a person diverted water from a stream, this physical appropriation established a claim to that portion of the stream s flow. In case of conflicts, the person who first appropriated the water has priority, a scheme often dubbed first in time, first in right. In the terminology of water law, the person who earlier gains a right to water has the senior right while the person who later acquires a right has the junior right. The date that one began to use the water is the priority date of one s water right. The state legislature s first comprehensive Water Code, adopted in 1917, codified this approach, confirming all existing rights but providing that future rights would be appropriated only through a state permit system. One limit on the rights of prior appropriators is the doctrine of beneficial use. This doctrine means that a water right is only as extensive as the legitimate use of water. In other words, a water right is not an absolute right of ownership to a specific amount of water. Rather it is the limited right to use only that water which is necessary to accomplish a constructive end associated with a specific parcel of land. Recognized beneficial uses include irrigation, domestic water supply, industry, and power generation. If water is wasted, then the water right excludes that portion of the water that is wasted. Also, if a water right holder wants to use more water, then a new right, with a later priority date, must be acquired. Two other limits on water rights are embodied in the related doctrines of relinquishment and abandonment. These doctrines reflect a corollary of the requirement of beneficial use: when water is no longer used for a beneficial purpose, the water right is lost. Abandonment is a common-law doctrine under which a water right is lost when a water right holder intentionally fails to use the water for an extended period of time. Relinquishment is a related statutory doctrine under which a water right is lost upon the voluntary failure to use a water right for five years, even if there is no intent to abandon the right. Municipal water rights are exempt from relinquishment, but not from abandonment. Traditionally, a beneficial use of water entailed extracting water from a river or stream. Over time, however, recognition of the importance of ensuring that sufficient water remains within a stream has grown. In 1949, the legislature amended the Fisheries Code to allow water rights to be conditioned or denied if the extraction of water from the stream would harm fish. Then, in the 1960s and 1970s, the legislature recognized that instream uses could be beneficial uses under the Water Code. The Water Resources Act of 1971 gave the Department of Ecology the authority to establish minimum instream flow levels before issuing new water rights in a given basin. These instream flows are considered water rights with a priority date of the date as of Ecology s adoption of the rule. Instream flow minimums have been established for just

39 Rob McKenna June 8, 2006 Page 4 one-third of the state s watersheds, and even then, are often unmet because of their junior status to existing water rights. The Municipal Water Law carries out a dramatic and unjust transformation of this system, which has gradually evolved over a century and a half. It turns the two fundamental premises of Washington water law that water rights are based on priority in time and are limited by the extent of beneficial use on their heads. Instead, it singles out a class of water rights holders and gives them a form of super-priority over other holders and also expands their rights beyond the extent of their actual, beneficial use. These expanded water rights also harm the fish, wildlife, recreational, and cultural benefits of instream flows and unfairly shift the burden of protecting instream flows onto other water rights holders. Moreover, in blatant disregard for the basic constitutional principle of the separation of powers, it attempts to retroactively overrule a holding of the Washington Supreme Court. To ensure the fair and equitable treatment of all water rights holders in the State of Washington and to protect the precious natural heritage of our streams and rivers, the Petitioners request that you file suit to invalidate the following provisions of the MWL. I. INCLUSION OF PRIVATE ENTITIES IN THE DEFINITION OF MUNICIPAL WATER SUPPLIER AND THE RESULTING EXEMPTION FROM RELINQUISHMENT (SECTION 1(3)-(4)). The Municipal Water Law includes non-municipal entities in its definition of municipal water suppliers, thus greatly expanding the universe of entities eligible for the special privileges that attach to this status. The statute defines a municipal water supplier as an entity that supplies water for municipal water supply purposes. MWL 1(3), codified at RCW (3). Municipal water supply purposes is defined to include a beneficial use of water [f]or residential purposes through fifteen or more residential service connections or for providing residential use of water for a nonresidential population that is, on average, at least twenty-five people for at least sixty days a year. MWL 1(4), codified at RCW (4). This aspect of the definition encompasses private water systems, including those for private residential developments, hotels, trailer parks, and mobile home parks. By defining municipal water suppliers to include private entities, the MWL retroactively expands the water rights of these entities at the expense of other water right holders. The definitions in the MWL allow private developers and other non-municipalities to benefit from the retroactive expansions of municipal water rights described below. They also allow private developers to take advantage of the pre-existing exemption from relinquishment granted to traditional municipalities. See RCW (2)(d). Before passage of this law, such entities who failed, without sufficient cause, to put a water right to beneficial use for a period of five successive years, were deemed to have relinquished the unused portion of the right to the

40 Rob McKenna June 8, 2006 Page 5 state, thus making the water available for junior appropriators or instream flows. RCW The retroactive exemption from relinquishment of a particular class of private water right holders violates the separation of powers. In Department of Ecology v. Theodoratus, 135 Wash.2d 582, 957 P.2d 1241 (1998), the Washington Supreme Court refused to treat a private water supplier as a municipal water supplier with water rights that would be exempt from statutory relinquishment. Id. at 594. By retroactively providing private developers with an exemption from relinquishment that the court rejected in Theodoratus, the legislature is attempting to overrule that court s decision. The expanded definition of municipal water supplier violates the separation of powers, because a statute cannot be applied retrospectively when it contravenes a construction placed on the original statute by the judiciary. Any other result would make the legislature a court of last resort. In re Detention of Brooks, 145 Wash.2d 275, 284, 36 P.3d 1034 (2001) (citations and internal quotation marks omitted); see also Magula v. Benton Franklin Title Co., Inc., 131 Wash.2d 171, 182, 930 P.2d 307 (1997) ( Any attempt by the Legislature to contravene retroactively this Court s construction of a statute is disturbing in that it would effectively be giving license to the [L]egislature to overrule this [C]ourt, raising separation of powers problems. ) (citation omitted). The retroactivity of this provision of the MWL also violates the substantive due process rights of other water right holders. A law that retroactively impairs vested property rights violates due process. See State v. Shultz, 138 Wash.2d 638, 646, 980 P.2d 1265 (1999) ( A retroactive law violates due process when it deprives an individual of a vested right. ) (citing State v. Hennings, 129 Wash.2d 512, 528, 919 P.2d 580 (1996)); Caritas Services, Inc. v. Department of Social and Health Services, 123 Wash.2d 391, 413, 869 P.2d 28 (1994) ( Due process is violated if the retroactive application of a statute deprives an individual of a vested right. ) (citation and internal quotation marks omitted). A vested water right is private property subject to due process protections. Chumstick Creek Drainage Basin in Chelan County v. Department of Ecology, 103 Wash.2d 698, 705, 694 P.2d 1065 (1985); Nielsen v. Sponer, 46 Wash. 14, 15, 89 P. 155 (1907). By exempting certain private water right holders from relinquishment, the effect of the statute is to resurrect water rights that have already been relinquished to the state for nonuse and that would otherwise be available for junior appropriators or instream flows. The statute is unconstitutional because it retroactively impairs the vested rights of junior right holders. II. ELIMINATION OF THE BENEFICIAL USE REQUIREMENT FOR MUNICIPAL WATER SUPPLIERS (SECTION 6(3)). The MWL s elimination of the beneficial use requirement for certain water rights violates both due process and the separation of powers. Section 6(3) retroactively eliminates the beneficial use requirement for municipal water suppliers. MWL 6(3), codified at RCW (3). It is a fundamental precept of western water law that water rights acquired

41 Rob McKenna June 8, 2006 Page 6 by prior appropriation are valid only to the extent that the appropriated water is put to beneficial use. Department of Ecology v. Acquavella, 131 Wash.2d 746, 755, 935 P.2d 595 (1997). Moreover, in Theodoratus, 135 Wash.2d at 590, the Washington Supreme Court specifically held that a private water purveyor s water right must be based upon actual application of water to beneficial use, not upon system capacity. This ruling rejected the Department of Ecology s previous practice of treating inchoate rights as perfected rights based on the capacity of the water system before the water had been put to beneficial use an approach known as the pumps and pipes method. Section 6(3) retroactively eliminates the beneficial use requirement for water rights used for municipal water supply purposes, including those held by private entities: This subsection applies to the water right represented by a water right certificate issued prior to September 9, 2003, for municipal water supply purposes as defined in RCW where the certificate was issued based on an administrative policy for issuing such certificates once works for diverting or withdrawing and distributing water for municipal supply purposes were constructed rather than after the water had been placed to actual beneficial use. Such a water right is a right in good standing. RCW (3). The elimination of the beneficial use requirement thus explicitly applies only retroactively. Section 6(4) makes this retroactivity even more explicit by requiring that after the effective date of the legislation the Department of Ecology may issue certificates only on the basis of actual beneficial use. MWL 6(4), codified at RCW (4). The potential impacts of this change are enormous. For example: Although it has never used this amount, the City of Everett can now claim 250 million gallons per day (mgd) of water from the Sultan River. Such withdrawals are more than enough to dewater the river for much of the year. The City of Spokane can expand its water usage from 185 mgd to 348 mgd. Even at current usage levels the Spokane River frequently fails to meet recommended minimum flow levels during the summer, harming fish habitat, water quality and recreational and aesthetic use of the river. In 2003, the Department of Ecology determined that the MWL would create water availability problems in at least three basins in the Puget Sound area that support salmon populations. Private entities are already taking advantage of the MWL s extension of this exemption to the newly expanded class of municipal water suppliers. For example, the Deer Creek Water

42 Rob McKenna June 8, 2006 Page 7 Association has acquired the large unused portion of a private water right in Whatcom County. In the 1940s, a private developer, C. V. Wilder, acquired a paper water right in Whatcom County that entitled him to 450 gallons per minute (gpm) and 375 acre-feet per year (afy). The right was for both domestic and irrigation uses. He later transferred this water right to a private water association, the Belden Acres Water Association. The Belden Acres system used only about 32 gpm and 7 afy. Thus very little of Wilder s paper water right was ever put to beneficial use the unused portion of the right could be as large as 418 gpm and 368 afy. More recently, the Deer Creek Water Association, a private water association in Whatcom County, purchased the Wilder water right from Belden Acres. The transfer of the unused portion of this water right would not have been possible without the Municipal Water Law. Neither Belden Acres nor Deer Creek would have been considered a municipal water supplier before the passage of the MWL. Therefore, under governing Washington Supreme Court precedent, Belden Acres did not have a valid water right in the unused portion of the paper right. Its water right was limited to that portion of its certificate that was actually put to beneficial use. Moreover, Belden Acres would not have been able to transfer its unused rights to Deer Creek. Now, however, Deer Creek has been able to acquire this water right in a closed basin, to the detriment of all junior water right holders and instream resources in the basin. Deer Creek has also been able to change its place of use to include the Belden Acres service area without filing a change application, again through the operation of the MWL. This retroactive expansion of water rights, as applied to private entities through the expansive definition of municipal water supply purposes, violates the separation of powers by attempting to overrule retroactively a decision of the Washington Supreme Court. More specifically, Section 6(3) retroactively resurrects and validates the pumps and pipes certificates invalidated by Theodoratus. Therefore, these provisions violate the separation of powers. See In re Detention of Brooks, 145 Wash.2d at 284. The retroactive elimination of the beneficial use requirement also violates substantive due process. This provision retroactively expands the water rights of certain senior holders by perfecting the unused portions of their paper rights. It therefore correspondingly decreases the rights of junior holders. The junior holders water rights are vested usufructuary property rights. The MWL, by retroactively impairing those rights, violates due process. See State v. Shultz, 138 Wash.2d at 646. III. CHANGES IN THE PLACE OF USE (SECTION 5(2)). The place of use provision of the MWL deprives property owners of vested rights without due process of law. Section 5(2) expands the place of use of a municipal water right from the area specified on the water right certificate to the service area described in a water system plan. MWL 5(2), codified at RCW (2). Moreover, unlike RCW (1) and

43 Rob McKenna June 8, 2006 Page (2)(d), the previously applicable provisions, the MWL does not require that a change in the place of use be consistent with, and avoid impairing, existing water rights. As a practical matter, making the place of use coextensive with the service area boundary will result in greater use of water, which will, in turn, reduce the amount of water available to junior appropriators. By impairing vested water rights, this aspect of the 2003 Bill makes substantive changes that cannot be retroactively applied consistent with due process protections. Developers are already taking advantage of this provision to change the place of use of their water rights without public oversight. Following the passage of the MWL, the Department of Ecology notified a number of water right holders that their pending change applications were unnecessary because the MWL had conferred the desired changes by operation of law. Those applicants, including PUD No. 1 Whatcom County, the Rochester Water Association, the Old Settlers Water Association, Arnold s Water Company, Arcadia Community Water Association, Skagit County Water District No. 1, and the Kitsap PUD, subsequently withdrew their change applications. Since then, Ecology has informed dozens of other potential applicants for changes to their water rights that they need not go through the legal process. They are now able to change the place of use of their water right without any public review. For example, the Fircroft Water Works, a water supplier on Orcas Island, originally filed an application to change the place of use of its water right in 2001, before the passage of the MWL. In 1981, Fircroft was granted a ground water certificate for community supply for the three developments on Orcas Island. Fircroft applied to change the place of use of its water right and add additional purposes, in order to supply water to additional developments and truck water to other parts of the island. The YMCA of Greater Seattle, which operates Camp Orkila on Orcas Island, protested this change. The YMCA has a ground water right that is senior to the Fircroft right as well as two surface water rights that are junior to Fircroft s right. The YMCA was and is concerned that approval of the change would allow Fircroft to expand its water use beyond its historical beneficial use level, and that the removal of water to other parts of the island will lower the water table. In the autumn of 2003, however, the Department of Ecology informed Fircroft that its change application was moot because the MWL had accomplished the requested changes by operation of law. Fircroft subsequently withdrew its change applications and the YMCA lost its right to protest. In its application to both past and future water system plans and plan amendments, the change-of-use provision violates procedural due process. The MWL permits municipalities and developers to change the place of use of their water rights without following the application procedures provided for under the Washington Water Code. These procedures protect the

44 Rob McKenna June 8, 2006 Page 9 interests of other water right holders, implementing the principle that changes in the place of use of a water right are permitted only if such change can be made without detriment or injury to existing rights. RCW (1); see Okanogan Wilderness League v. Town of Twisp, 133 Wash.2d 769, 777, 947 P.2d 732 (1997) ( Both upstream and downstream water right holders can object to a change in the point of diversion or the place of use, which could affect natural and return flows and, thus, adversely affect their rights. ). Procedural due process requires that an individual be provided with some form of a notice and hearing before being deprived of a protected property interest. City of Redmond v. Arroyo-Murillo, 149 Wash.2d 607, 612, 70 P.3d 947 (2003). Yet the MWL expansions occur by operation of law, bypassing entirely the Water Code s processes for protecting junior water rights and instream flows. Therefore, these provisions of the MWL violate the procedural due process rights of junior water right holders. See Sheep Mountain Cattle Co. v. Dep t of Ecology, 45 Wash.App. 427, 431, 726 P.2d 55 (1986). This provision also violates substantive due process. A municipality or developer s expansion or change of its place of use can harm other water rights holders both by increasing the amount of water used to by changing the pattern of return flows. Moving the water far from the point of diversion can reduce the amount of water available for junior users. As discussed above, the retroactive expansion of certain water right to the detriment of others violates due process. REQUEST FOR ACTION The Petitioners request that you investigate the constitutional violations outlined above and take action to invalidate those provisions of the MWL that facially violate the Washington and United States Constitutions. We would like to work with you to address these problems. However, if no other option is available to us to resolve the issues raised in this letter, then we may take further legal action. If you have any questions or otherwise wish to discuss this matter further, please contact undersigned counsel. Sincerely, Patti Goldman Shaun Goho Attorneys for Petitioners

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