Performance audit, Arizona Department of Water Resources

              State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Douglas R. Norton
Auditor General
ARIZONA
DEPARTMENT OF
WATER RESOURCES
April 1999
Report No. 99-8
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
April 23, 1999
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Ms. Rita P. Pearson, Director
Arizona Department of Water Resources
Transmitted herewith is a report of the Auditor General, A Performance Audit of the
Arizona Department of Water Resources. This report is in response to a May 27, 1997,
resolution of the Joint Legislative Audit Committee. The performance audit was
conducted as part of the Sunset review set forth in A.R.S. §§41-2951 through 41-2957.
The report addresses the Department’s efforts to ensure a long-term water supply for
the State. The report discusses a number of statutory restrictions and exemptions that
limit Arizona’s ability to achieve the statutory goal of safe yield by 2025. Safe yield is
achieved when no more groundwater is withdrawn from the aquifer than is annually
replaced. Projections indicate that groundwater depletion will likely continue past
2025 in three of the State’s most severely depleted areas. The report recommends that
the Legislature consider establishing a study commission to address the State’s ability to
achieve the safe yield goal. Further, the report discusses regulatory limitations in the
Groundwater Code that may result in water supply problems both now and in the
future. Specifically, the consumer protections relating to sufficient water supply are
lacking in certain areas of the State. The report recommends changes to statutes to
enhance access to information about sufficiency of water supplies, to extend the assured
water supply provision, and to establish well spacing requirements to those areas of the
State lacking these protections. Finally, the report presents information on Arizona’s
water regulatory framework, which does not have authority over all types of water.
Surface water, groundwater, and effluent (treated wastewater) are regulated as
different types of water.
April 23, 1999
Page -2-
As outlined in its response, the Department agrees with the findings. Further, although
we recommend the Legislature establish a study commission to address ways to
achieve safe yield, the Department is already moving forward to implement this
recommendation administratively by creating a statewide task force for this purpose.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on April 26, 1999.
Sincerely,
Douglas R. Norton
Auditor General
Enclosure
i
SUMMARY
The Office of the Auditor General has conducted a performance audit and Sunset review of
the Arizona Department of Water Resources, pursuant to a May 27, 1997, resolution of the
Joint Legislative Audit Committee. This performance audit was conducted as part of the
Sunset review set forth in Arizona Revised Statutes (A.R.S.) §§41-2951 through 41-2957.
The Department of Water Resources (Department) was established in 1980. Its primary re-sponsibilities
are to ensure a long-term water supply for the State, to administer the State’s
water rights system, and to represent Arizona’s water rights with the federal government.
The Department has authority over groundwater (water beneath the surface). Conversely,
the Department has no enforcement authority over surface water (lakes, streams, and reser-voirs),
and no statutory authority over effluent (treated wastewater). In fiscal year 1999, the
Department had 252 full-time equivalent employees and an operating budget of approxi-mately
$18.3 million.
The purpose of this audit was to evaluate the Department’s efforts to ensure a long-term
water supply for the State. The audit specifically identified barriers faced in accomplishing
the safe yield goal and regulatory limitations that may impact future water supplies. Fur-ther,
the audit discusses the 12 Sunset Factors the Legislature is to consider in determining
whether to continue or terminate the Department.
Groundwater Depletion
Is Likely to Continue
(See pages 9 through 19)
Under the current regulatory structure, the statutory goal of “safe yield” will not likely be
achieved by 2025 for the Prescott, Phoenix, and Tucson areas. Safe yield is accomplished
when no more groundwater is withdrawn from the aquifer than is annually replaced. The
Groundwater Code (Code), created in 1980 along with the Department, designates the
State’s most severely depleted areas as Active Management Areas (AMAs) and requires the
Department to implement a series of Management Plans with conservation requirements for
municipal, agricultural, and industrial users in each AMA. A review of the Management
Plans indicates that they comply with the Code’s mandates requiring the establishment of a
water rights system and the continuing development of mandatory conservation require-ments
for water users. However, the Department projects that even if the Prescott, Phoenix,
ii
and Tucson AMAs meet all requirements of the Management Plans currently being devel-oped,
they will not achieve this safe yield by 2025 because the Groundwater Code contains a
number of statutory restrictions and exemptions that limit the AMA’s ability to achieve safe
yield. These include the following:
n The Code created several types of grandfathered rights, mainly for agricultural and in-dustrial
users. For these users, the Code allows the Department to make only slight re-ductions
in annual groundwater allotments. Further, it does not give the Department
authority to require these users to eventually increase their reliance on renewable water
sources, such as lakes, rivers, or treated effluent, as a means to reduce their reliance on
groundwater.
n Agricultural users with grandfathered rights can accrue credits for unused groundwater
and carry the credits over for future use. These credits have created a lien against the
groundwater supply that, if used, could increase groundwater depletion and hamper the
AMAs’ ability to achieve safe yield. In 1997, credits in the Prescott, Phoenix, and Tucson
AMAs totaled more than 6 times the total groundwater consumption of all users in these
AMAs in 1995.
n The Code created eight types of groundwater withdrawal permits that allow users with-out
a grandfathered right to pump groundwater. For categories related to mineral ex-traction
and industrial uses, the Department must issue a permit if the applicant meets
certain criteria and must renew it as long as the applicant continues to do so.
n Provisions relating to the municipal sector also contribute to continued groundwater
depletion. For example, the Code’s conservation requirements focus on the water pro-vider,
not on water users. However, these providers have little ability to control the
amount of water used by their customers.
The Legislature should consider forming a study commission to address the State’s ability to
achieve the safe yield goal. A study commission would allow input from water resource
experts, civic leaders, and other important interests, such as municipalities, agriculture, and
mining, that are impacted by the State’s water resource policies. The commission could ad-dress
the following issues:
n The advisability of purchasing and retiring grandfathered groundwater rights, and pos-sible
methods and timelines for doing so;
n The advisability of either eliminating agricultural flexibility credits or preventing addi-tional
credits from accruing;
iii
n The advisability of limiting groundwater withdrawal permits and possible methods for
doing so; and
n The advisability of encouraging municipal providers to rely on renewable water sources
rather than groundwater, and possible methods for doing so.
Regulatory Limitations
May Create Water Supply Problems
As the Population Increases
(See pages 21 through 24)
Although most of the State currently has a sufficient water supply, limitations in the regu-latory
structure may produce water supply concerns both now and in the future. The
population outside of the AMAs is projected to grow by an additional 500,000 persons by
2025. However, limited consumer protections outside AMAs provide current and future
residents with less assurance about future water supply than their counterparts in the
AMAs. Specifically, the adequate water supply provision, applicable to areas outside of the
AMAs, requires only that the original purchaser of a new subdivision lot receive notification
of the sufficiency of the water supply. The provision does not prohibit new subdivisions
from being developed or sold in the absence of sufficient water, and does not require that
subsequent purchasers receive notification regarding insufficient water. To allow subse-quent
purchasers to receive notification of the sufficiency of the water supply during a title
search, the Legislature should consider amending A.R.S. §32-2181(F) to require that devel-opers
record with the County Recorder’s Office the determination regarding sufficiency of
the subdivision’s water supply.
In contrast, the assured water supply provision, applicable within the AMAs, prohibits new
subdivisions from being developed and sold if there is insufficient water to meet the subdi-vision’s
needs for at least 100 years. To provide greater protection to areas outside of the
AMAs, the Legislature should consider amending A.R.S. §45-576 to extend the assured wa-ter
supply provision to these areas.
For areas outside of the AMAs, the Department does not regulate the spacing between wells
or the impact of a new well on existing wells. In contrast, within AMAs the Code prevents
wells from being drilled if they will excessively decrease the water supply of existing wells.
As growth occurs in communities outside AMAs without renewable water supplies, most
new residents will drill wells to obtain groundwater. If additional wells deplete the water
supply, existing residents, new homeowners, municipalities, and industry will be affected.
The Legislature should consider amending A.R.S. §45-598 to give the Department limited
authority to establish well spacing requirements in areas outside of the AMAs.
The establishment of well spacing requirements in areas outside the AMAs would impact
some new well applicants and require additional Department resources. Applicants for
iv
wells that pump 35 or fewer gallons per minute, typically for residential use, would not
have any additional requirements imposed upon them. However, the Department indicates
that applicants for wells that pump more than 35 gallons per minute would be required to
conduct a well-impact analysis at a cost of $2,000 to $4,000, based on Department estimates.
The Department estimates it would need 2 additional hydrologist positions and 1 water re-source
specialist position to review these estimated 350 well applications and their hydro-logic
studies.
Other Pertinent Information—
Arizona Does Not Regulate
All Types of Water
(See page 25)
Currently, Arizona’s water regulatory framework treats surface water, groundwater, and
effluent (treated wastewater) as different types of water. The Department has neither en-forcement
authority over surface water nor statutory authority over effluent and is therefore
not able to impose conservation requirements on these types of water.
v
Table of Contents
Page
Introduction and Background........................................................... 1
Finding I: Groundwater Depletion
Is Likely to Continue...................................................................... 9
Groundwater Code Sets
Safe Yield Goal for Three AMAs................................................................................... 9
Statutory Restrictions and
Exemptions Inhibit the AMAs’
Ability to Achieve Safe Yield.......................................................................................... 11
Groundwater Users Will Continue
to Use More Groundwater
Than Is Replaced............................................................................................................... 14
Commission Approach a Useful
Way to Address Safe Yield Issues................................................................................. 17
Recommendation.............................................................................................................. 19
Finding II: Regulatory Limitations May Create
Water Supply Problems As the
Population Increases..................................................................... 21
Consumers Outside the
AMAs Have Less Assurance
of Water Supply................................................................................................................ 21
Recommendations............................................................................................................ 24
Other Pertinent Information............................................................... 25
Arizona Does Not
Regulate All Types
of Water .............................................................................................................................. 25
vi
Table of Contents (concl’d)
Page
Sunset Factors.................................................................................... 27
Agency Response
Figures and Tables
Figure 1 Arizona Department of Water Resources
Active Management Areas
As of November 1998...................................................................... 2
Figure 2 Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Reliance on Groundwater by Water-Management Sectors
Year Ended December 31, 1995..................................................... 15
Table 1 Arizona Department of Water Resources
Statement of Revenues, Expenditures, and Changes
in Fund Balance
Years Ended or Ending June 30, 1997, 1998, and 1999
(Unaudited) ....................................................................................... 6
Table 2 Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Dependence on Groundwater by Sector
Year Ended December 31, 1995..................................................... 16
Table 3 Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Groundwater Depletion in Acre Feet
Actual Amounts in Years Ended December 31, 1990 and 1995
and Projected Amounts in Years Ended
December 31, 2000 and 2025.......................................................... 17
1
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance audit and Sunset review of
the Arizona Department of Water Resources, pursuant to a May 27, 1997, resolution of the
Joint Legislative Audit Committee. This performance audit was conducted as part of the
Sunset review set forth in Arizona Revised Statutes (A.R.S.) §§41-2951 through 41-2957.
The Department’s Role in
Arizona’s Water Regulatory Framework
The Department was established in 1980 when the Groundwater Code became law. The
Code’s primary objectives are 1) to control severe groundwater depletion, or overdraft, and
2) to provide the means for allocating Arizona’s limited groundwater resources to most ef-fectively
meet the State’s changing water needs. The Department’s responsibilities include
ensuring a long-term water supply for the State, administering the State’s water rights sys-tem,
and representing Arizona’s water rights with the federal government.
In Arizona, surface water and groundwater are regulated as separate substances. Surface
water is water flowing in streams or canyons, in ravines or natural channels, in lakes or
ponds, and in springs on the surface. Groundwater is water located in an aquifer under the
earth’s surface. Surface water rights are regulated under the “doctrine of prior appropria-tion.”
In summary, the first person to put surface water to a beneficial and reasonable use
acquires a right to that water. The Department has no authority to enforce the use of surface
water pursuant to those rights, although the Department maintains surface water rights
registries and issues certificates for appropriated surface water rights. Conversely, the De-partment
regulates groundwater under the statutory authority granted in A.R.S. §§45-401
through 45-704. Finally, the federal government regulates the Colorado River, and oversees
contracts that allow each state through which the river flows to use a certain amount of wa-ter
each year.
As part of Arizona’s groundwater regulatory framework, the Groundwater Code initially
established four Active Management Areas (AMA) administered by the Department. The
AMAs are geographical boundaries surrounding groundwater basins where groundwater
depletion is the most severe (see Figure 1, page 2). The initial AMAs were Phoenix, Pinal,
Prescott, and Tucson. In 1994, the Santa Cruz AMA was formed by splitting from the Tuc-son
AMA. The goals of the Phoenix, Tucson, and Prescott AMAs are to achieve safe yield of
groundwater by the year 2025. “Safe yield” means that no more groundwater is withdrawn
from the aquifer than is annually replaced.
2
Figure 1
Arizona Department of Water Resources
Active Management Areas
As of November 1998
Source: Arizona Department of Water Resources.
3
However, the Pinal and Santa Cruz AMAs have unique goals. The Pinal AMA is allowed to
deplete a portion of its aquifers over a 100-year period to not only extend the agricultural
economy but also to preserve water supplies for future nonagricultural uses. The Santa Cruz
AMA, with its unique hydrologic conditions, has a goal to maintain its current status as a
safe-yield AMA and to prevent local water tables from experiencing long-term declines. The
balance of the State surrounding the AMA boundaries is not subject to the same regulatory
requirements as the AMAs.
Further, the Groundwater Code requires the Department to implement a series of five se-quential
Management Plans for each AMA over a 45-year period that began in 1980 and will
end in 2025. The Management Plans contain not only the required rules to administer the
State’s groundwater rights system for all groundwater users within the AMAs, but also the
conservation requirements for the three principal groundwater user categories (municipal,
agricultural, and industrial) for the purpose of achieving the water conservation goals. The
Department is currently developing the Third Management Plans for all AMAs. The provi-sions
of the Third Management Plans will be in effect from 2002-2010 and will include up-dated
conservation requirements for groundwater users and updated programs to supple-ment
the water supply.
Organization and Staffing
The Department of Water Resources is allocated 252 full-time equivalent positions (FTE) for
fiscal year 1999. In addition to the six FTEs allocated to the Director’s Office, the agency is
divided into six divisions and one office staffed accordingly:
n Groundwater Management—This division is allocated 76 FTEs and consists of the five
Active Management Areas, the Office of Assured and Adequate Water Supply Certifica-tions,
and the Groundwater Management Support Section. The five AMAs are responsi-ble
for development and implementation of groundwater management plans, regula-tions,
and grant programs designed to reduce groundwater use to meet the goals of each
AMA. The Office of Assured and Adequate Water Supply administers programs to en-sure
that water supplies are adequate to meet the long-term needs of new developments
within the AMAs. The Groundwater Management Support Section manages ground-water
rights, well drillers, well construction, and well registries.
n Surface Water Management—There are four sections within this division and a staff
allocation of 47 FTEs. The Flood Mitigation Section provides assistance to local commu-nities
in developing flood control projects and flood warning systems. The Colorado
River Management Section is responsible for negotiating with the federal government,
other states, and Indian tribes on issues related to the allocation and use of Colorado
River water, including Central Arizona Project water allotments. The Surface Water and
Adjudication Section issues permits for the right to use surface water, maintains water
4
rights registries, and provides technical and administrative support to the Arizona
courts presiding over the general adjudication of water rights in Arizona. The Dam
Safety Section inspects and evaluates all nonfederal jurisdictional dams for safety defi-ciencies.
n Statewide Water Planning—This division is allocated 24 FTEs and consists of the Third
Management Plan Development Group, the Water Resources Planning Section, the Wa-ter
Protection Program, and the Water Quality Fund. The Third Management Plan De-velopment
Group compiles, edits, and distributes the management plans for public dis-semination.
The Water Resources Planning Section works with local communities to
compile technical data and prepare planning studies to address water management
needs outside of the AMAs. The Water Protection Program provides staff support for
the Arizona Water Protection Fund Commission. The Water Quality Fund administers
agency-mandated responsibilities relating to the Department of Environmental Quality’s
Water Quality Assurance Fund (WQARF).
n Hydrology—There are five sections and a staff allocation of 42 FTEs within this division:
Water Resources, Basic Data, Surface Water and Recharge, Modeling, and Technical
Support. This division is responsible for the collection of surface and groundwater data
statewide. The collected information is then analyzed and disseminated in the form of
technical documents, report publications, and special studies of critical areas. This divi-sion
also provides technical assistance and hydrological reviews for federal and state
governments, all areas of the agency, and local water users.
n Legal Services—The Legal Division operates with 13 FTEs. The Division both initiates
and defends against various court actions relating to water matters. Other activities in-clude
legal support services on administrative rules, enforcement cases, grant programs,
and Indian water settlements. To avoid conflicts of interest with other state agencies, the
Attorney General’s Office does not represent the agency, except for criminal prosecu-tions
and civil tort actions.
n Information Technology—There are 21 FTEs and three sections within this division:
Application Development, Network Support, and Geographic Information Systems. The
division provides agency support in system operations, systems development, technical
support, and a help desk for all information systems including mainframe, work sta-tions,
local-area, and wide-area networking.
n Finance and Administration—This office consists of 23 FTEs and is divided into three
sections: Finance, Human Resources, and General Services. Agency management sup-port
functions provided include budget, personnel, fiscal services, payroll, purchasing,
central records room management, mail delivery, copying, facilities, and sub-motor
pool.
5
Department of Water Resources
Revenues and Expenditures
Agency operations are funded primarily from General Fund appropriations. In fiscal year
1999, General Fund appropriations were approximately $13.5 million. Other sources of
revenue are intergovernmental; licenses, fees, and permits; fines and forfeitures; sales and
charges for service; and investment interest. For fiscal year 1999, the Department budgeted
that it will expend approximately $18.3 million for its operations. Table 1 (see page 6) illus-trates
the Department’s actual and estimated revenues and expenditures for fiscal years
1997 through 1999. In addition, the agency acts as a fiduciary for the Arizona Water Protec-tion
Fund, the Water Bank Fund, and several special funds.
Audit Scope and
Methodology
This audit focused on evaluating barriers the Department faces in accomplishing the safe
yield goal and regulatory limitations that may impact future water supplies. Time and re-source
limitations did not allow for the review of ongoing programs and activities such as
well registries, dam safety, flood mitigation, and the collection of hydrology data. This per-formance
audit presents findings and recommendations in two areas:
n Groundwater depletion is likely to continue past the safe yield goal date of 2025; and
n Limitations in the water regulatory framework may cause problems as the State’s
population increases.
In addition to these audit areas, the report contains Other Pertinent Information relating to
Arizona’s water regulatory structure, which does not regulate all types of water (see page
25). Finally, the report contains the responses to the 12 Sunset Factors that should be consid-ered
in determining whether the Arizona Department of Water Resources should be con-tinued
or terminated (see pages 27 through 32).
6
Table 1
Arizona Department of Water Resources
Statement of Revenues, Expenditures, and Changes in Fund Balance1
Years Ended or Ending June 30, 1997, 1998, and 1999
(Unaudited)
1997
(Actual)
1998
(Actual)
1999
(Estimated)
Revenues:
State General Fund appropriations $12,961,300 $13,279,200 $13,477,200
Licenses, fees, and permits 4,822,025 1,278,104 2 948,000
Intergovernmental 420,901 310,924 300,900
Sales and charges for services 23,372 21,357
Fines and forfeits 57,493 70,150 70,000
Interest on investments 3 1,312,444 1,747,537 1,803,900
Other 208,862 202,725 504,300
Total revenues 19,806,397 16,909,997 17,104,300
Expenditures:
Personal services 7,611,002 8,153,761 8,699,300
Employee related 1,625,484 1,704,170 1,849,500
Professional and outside services 3,572,074 2,869,647 3,601,100
Travel, in-state 289,745 290,103 283,200
Travel, out-of-state 40,436 46,120 75,300
Aid to organizations 301,105 53,029 50,000
Other operating 2,904,912 2,902,864 3,066,300
Capital outlay 38,290 311,873 689,700
Total expenditures 16,383,048 16,331,567 18,314,400
Excess of revenues over (under) expenditures 3,423,349 578,430 (1,210,100)
Other financing sources (uses):
Net operating transfers in 75,649 217,805
Remittances to the State General Fund (2,344,005) (485,376) 2 (405,200)
Reversions to the State General Fund (67,131) (23,267)                   
Total other financing uses (2,335,487) (290,838) (405,200)
Excess of revenues and other sources over (under)
expenditures and other uses 1,087,862 287,592 (1,615,300)
Fund balance, beginning of year 12,041,146 13,129,008 13,416,600
Fund balance, end of year $13,129,008 $13,416,600 4 $11,801,300
1 Includes the financial activity of the Ground Water Users Advisory and Council’s Augmentation Funds because the Department
has authority over these Funds. Excludes financial activity of the State Water Storage, Water Quality Assurance, Water Re-sources
Flood Control Loan, and Water Resources Alternative Flood Control Funds because the Department holds these Funds’
assets in either an agency or trustee capacity. Except for their administrative costs, the Arizona Water Protection and Water
Bank Funds’ financial activity is excluded for the same reason.
2 1997 amendments to A.R.S. §§45-611 and 612 caused a decrease of approximately $3.5 million in 1998 Departmental revenues
and a corresponding decrease of approximately $1.8 million in remittances to the State General Fund. The amendments are ex-pected
to cause a further reduction in 1999.
3 Includes interest earned on Arizona Water Protection and Water Bank Funds’ investments that pays for their administrative
costs. The increase in interest revenue is based on an increase of approximately $17 million in the Funds’ cash balances avail-able
for investment.
4 The $13.4 million fund balance is almost entirely reserved or designated for specific purposes: $8.7 million for active manage-ment
area assistance programs; $2.3 million for nonemergency dam repairs; $1.2 million to administer the Arizona Water Pro-tection
and Water Bank Funds; and $.6 million for flood warning systems, federal grants, and adjudication activities.
Source: The Arizona Financial Information System (AFIS) Accounting Event Extract File, AFIS Revenues and Expenditures by Fund, Program,
Organization, and Object report, AFIS Trial Balance by Fund report, AFIS Status of Appropriations and Expenditures report, and State of
Arizona Appropriations Report for the years ended June 30, 1997 and 1998; and Department-prepared worksheets for estimated fi-nancial
activity for the year ending June 30, 1999.
7
A variety of audit methods including site visits, interviews, and review of program docu-ments
were used to develop the findings and recommendations in this report. Specifically,
the following audit tasks were performed:
n To assess the operations of the AMAs, auditors visited the five AMA offices and inter-viewed
the AMA Directors. Further, auditors reviewed the Second and Draft Third
Management Plans to understand the groundwater rights system, the required conser-vation
programs, and the water use characteristics of the various water users.
n To become informed about water resource policy matters, auditors interviewed congres-sional
staff, federal agencies, department officials and staff, five other states’ water re-source
agencies, the Central Arizona Water Conservation District and other irrigation
districts, the University of Arizona Water Resources Research Center, elected and ap-pointed
municipal officials, representatives of agri-business and mining, water law at-torneys,
and other water resource policy experts.1
n To understand the water regulatory framework, auditors reviewed various documents
including the Groundwater Code (A.R.S. Title 45), administrative rules, the Arizona
Statewide Water Resources Assessment, State of the AMA Reports, newspaper and
journal articles, and reports from other states.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express their appreciation to the Department’s Director,
Deputy Director, and their staff for their cooperation and assistance throughout the audit.
1 Other state water resource agencies contacted included California, Colorado, Nevada, New Mexico,
and Utah.
8
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9
FINDING I
GROUNDWATER DEPLETION
IS LIKELY TO CONTINUE
Although Arizona law has set a goal of achieving safe yield by 2025 for groundwater sup-plies
in the State’s most severely depleted areas, groundwater depletion is likely to continue
past that date under the current regulatory structure. The Groundwater Code requires the
Department to adopt Management Plans, which are the principal mechanism used to ac-complish
the water management goals. However, even though the Management Plans
comply with the Code’s requirements, safe yield will not be achieved by 2025 because the
Code contains a number of statutory restrictions and exemptions that inhibit the ability to
achieve safe yield. Therefore, projections indicate groundwater users will continue using
more groundwater than is replaced. To address the issues affecting the State’s ability to
achieve the safe yield goal, the Legislature should consider forming a study commission.
Groundwater Code
Sets Safe Yield Goal
for Three AMAs
The Groundwater Code establishes a goal of safe yield by 2025 for the Prescott, Phoenix,
and Tucson areas. Safe yield is accomplished when no more groundwater is withdrawn
from the aquifer than is annually replaced. The Legislature created the Groundwater Code
in 1980 to conserve, protect, and allocate the State’s groundwater resources, to provide a
framework for the comprehensive management and regulation of groundwater, and to
protect the general economy and welfare of the State and its citizens. The Groundwater
Code designates areas of the State with the most severe groundwater depletion as Active
Management Areas (AMAs), which are subject to regulation under the Groundwater Code.
The Legislature, through A.R.S. §§45-562 through 45-568.02 of the Groundwater Code, re-quires
the Department to adopt a series of five Management Plans for each AMA to be im-plemented
in sequence from 1980 through 2025. The Department is currently finalizing the
Third Management Plans, which it plans to implement in 2002. The Management Plans are
the principal regulatory mechanism used by the AMAs to accomplish the water manage-ment
goals. The Code mandates the inclusion of progressively more restrictive groundwa-ter
conservation requirements and methods to supplement groundwater supplies from one
planning period to the next. The Code is specific as to what programs must be included in
each sequential Management Plan. A review of the Second and Draft Third Management
Plans indicates that they comply with the statutory mandates requiring the establishment of
10
a water rights system and the continuing development and refinement of mandatory con-servation
requirements for industrial, municipal, and agricultural water users. The Man-agement
Plan requirements and statutory time periods are summarized as follows:
The First Management Plan (1984-1990)
This Plan was the Department’s first step toward a com-prehensive
water management program. It included re-quirements
for DWR to establish a reasonable quantity of
water to irrigate farm crops, municipal conservation re-quirements
for reductions in per-capita water use, and
industrial conservation requirements mandating the latest
conservation technology.
The Draft Third Management Plan (2000-2010)
The Department is currently finalizing this Plan, which
will require the identification of various water manage-ment
strategies, including the use of water conservation,
supplemented water supply, groundwater recharge, and
water quality management by all water using sectors to
achieve the safe-yield goal.
The Fourth Management Plan (2010-2020) and
The Fifth Management Plan (2020-2025)
Both of these Plans are required to include additional con-servation
requirements that are outlined in the Code.
The Second Management Plan (1990-2000)
This Plan’s requirements included expansion of the con-servation
programs of the First Management Plan, a focus
on the implementation of water conservation measures to
achieve cost-effective and efficient water use, and integra-tion
of programs to increase water supplies into the AMA
management strategy.
11
Although the Management Plans prepared by the Department comply with the Code’s
mandated water management goals, the Department acknowledged as early as 1994 in its
Arizona Water Resources Assessment that the mandatory conservation requirements as
contained in the Plans may not be sufficient to reduce groundwater use to safe yield levels
in the Active Management Areas. For example, from 1985 to 1995 in the Phoenix and
Prescott AMAs, municipal water usage, as measured in gallons per capita per day, in-creased
for the majority of water providers. Yet, the Draft Third Management Plans are re-quired
by the Code to assume increased conservation by municipal providers. In addition,
the Phoenix AMA Draft Third Management Plan acknowledges that, “Although safe-yield
is an attainable goal, it is apparent that sufficient progress has not been made toward this
goal, nor have the statutory and institutional structures to succeed been fully established.”
Further, the Tucson AMA Draft Third Management Plan states, “[T]here are structural
weaknesses in certain portions of the Groundwater Code…because few of the Code provi-sions
are tied directly to achieving the [safe yield] goal.” Finally, both the Phoenix AMA and
Tucson AMA Draft Third Management Plans discuss alternative approaches or programs
that should be evaluated to assist the AMAs in their efforts to achieve the safe yield goal.
Possible programs or options to address water management problems include incentives for
groundwater recharge into the aquifer and use of renewable resources, restrictions on new
groundwater pumpage, and addressing the cost disparities between groundwater and re-newable
supplies.
Statutory Restrictions and
Exemptions Inhibit the AMAs’
Ability to Achieve Safe Yield
Even though the Management Plans comply with the Code’s requirements, safe yield will
not be achieved because the Groundwater Code contains a number of statutory restrictions
and exemptions that inhibit the AMAs’ ability to achieve the safe yield goal. When the
Groundwater Code was created in 1980, it established grandfathered rights that allowed all
historic groundwater users to continue using groundwater. The Groundwater Code further
established a flexibility account that allows agricultural users to accrue credits for unused
groundwater, and it created groundwater withdrawal permits that allow users without a
grandfathered right to use groundwater. The Groundwater Code also contains provisions
for the municipal sector that contribute to groundwater depletion.
The Department has limited ability to reduce grandfathered groundwater use—The
Groundwater Code created several types of grandfathered rights, depending on the historic
groundwater use, and established methods for determining the amount of groundwater as-sociated
with each grandfathered right. The majority of these grandfathered groundwater
rights are associated with the agricultural and industrial sectors. While the Groundwater
Code, through the Management Plan’s conservation requirements, allows the Department to
slightly reduce grandfathered right holders’ annual groundwater allotments, the Code does
not give the Department authority to significantly reduce the amount of groundwater associ-
12
ated with each grandfathered right. The Groundwater Code also does not give the Depart-ment
authority to require grandfathered rights holders to eventually convert from ground-water
to renewable water sources. The specific types of grandfathered rights are as follows:
n Irrigation grandfathered rights are granted to agricultural water users who irrigated
land with groundwater prior to 1980. The amount of the water right is based on the
crops that were grown and the greatest number of acres that were cultivated from 1975
to 1980. The groundwater associated with an irrigation grandfathered right is attached to
the land, and may not be used in a different location. Irrigation grandfathered right
holders in the Prescott, Phoenix, and Tucson AMAs were entitled to use a total of
1,961,070 acre feet of groundwater in 1995 pursuant to their grandfathered rights. This
entitled amount is equivalent to 175 percent of the total groundwater used in the three
AMAs in 1995.
n Type I nonirrigation grandfathered rights are associated with agricultural land that
was retired from agricultural use between 1965 and 1980 with a plan to convert the land
to a municipal or industrial use. Type I nonirrigation grandfathered rights are attached
to the retired land, and holders of these rights are granted three acre feet of groundwater
for each acre of retired land. Type I nonirrigation grandfathered right holders in the
Prescott, Phoenix, and Tucson AMAs were entitled to use a total of 143,183 acre feet of
groundwater in 1995 pursuant to their grandfathered rights. This entitled amount is
equivalent to 13 percent of the total groundwater used in the three AMAs in 1995.
n Type II nonirrigation grandfathered rights are associated with industrial or municipal
rather than agricultural uses. The Groundwater Code granted Type II rights to all people
who owned land in the AMA and pumped groundwater from that land for nonagri-cultural
uses prior to the creation of the AMA. The Groundwater Code entitles Type II
grandfathered rights holders to annually use as much water as they used in any one of
the five years prior to the AMA’s creation. Unlike the other grandfathered rights, which
are more restrictive, the Type II grandfathered right is not attached to the land and may
be sold or leased to another user. Further, the Type II grandfathered right may be trans-ferred
to new locations within an AMA. Type II nonirrigation right holders in the
Prescott, Phoenix, and Tucson AMAs were entitled to use 259,281 acre feet of ground-water
in 1995. This amount is equivalent to 23 percent of the total groundwater used in
the three AMAs in 1995.
Agricultural flexibility credits allow carryover to future years—The Groundwater Code
established a flexibility account for agricultural groundwater users that allows agricultural
users to accrue credits for unused groundwater entitlements and carry the credits over for
use in the future. Any portion of each agricultural user’s annual irrigation groundwater en-titlement
that is not used during the year is added to the user’s credit balance. Agricultural
users can accrue an indefinite amount of groundwater credits in their flexibility accounts, as
13
the Groundwater Code does not establish a maximum credit balance. These credits have
created a lien against the groundwater supply that if used in the future could increase
groundwater depletion, and further hamper the AMA’s ability to achieve safe yield. In 1997,
credits in the Prescott, Phoenix, and Tucson AMAs totaled more that 7.2 million acre feet, or
more than 6 times the total groundwater consumption for these AMAs in 1995. The agri-cultural
sector in the Phoenix AMA already has enough accrued credits to supply all agri-cultural
water needs in the AMA until at least 2010. In addition, agricultural water users can
use their accrued credits to exceed their annual groundwater allotments, which in turn al-lows
them to not comply with the Management Plan’s conservation requirements.
Groundwater withdrawal permits increase amount of groundwater not under the Depart-ment’s
control—In addition to grandfathered groundwater rights, the Groundwater Code
created eight types of groundwater withdrawal permits that allow users without a grand-fathered
right to pump groundwater. Five of the permits allow groundwater to be pumped
for reasons such as draining land for agricultural production or building stabilization, and
generating emergency electrical energy. The remaining three permits allow groundwater to
be used for mineral extraction and processing, and general industrial uses. These permits
are for terms of up to 50 years each, and are indefinitely renewable. Statutes require the De-partment
to issue permits for mineral extraction and industrial uses if the permit applicant
meets certain criteria. Statutes further require the Department to renew these permits for as
long as the applicant continues to meet the established criteria. All of the groundwater
withdrawal permits allow groundwater to be used in addition to existing grandfathered
rights uses. The withdrawal permits allowed an additional 144,488 acre feet of groundwater
to be used in 1995 in the three AMAs, although only 28,906 acre feet of groundwater, or 20
percent of the allowance, was actually used.
Municipal sector provisions contribute to groundwater depletion—Provisions in the
Groundwater Code relating to the municipal sector also contribute to continued ground-water
depletion. First, the Groundwater Code’s municipal conservation requirements focus
on the municipal water provider, not the municipal water user. This indirect regulation,
unlike the direct regulation of the agricultural and industrial sectors, is relatively ineffective
since water providers cannot control the amount of water used by their customers. The
amount of water that most providers are allowed to use, while remaining in compliance
with the Groundwater Code’s conservation requirements, is based on a per capita formula.
The provider, however, has no authority to require water users to restrict water use to this
per capita amount.
Additionally, the Groundwater Code establishes service area rights that allow municipal
water providers to use groundwater to meet the needs of customers within the providers’
service areas. The Department can encourage municipal providers to convert to renewable
water sources through the assured water supply provisions, which require new subdivi-sions
to demonstrate the availability of sufficient water to meet the subdivision’s projected
needs for at least 100 years. In demonstrating that they have an assured water supply, new
subdivisions are allowed to use only a limited amount of groundwater. New subdivisions
14
may demonstrate that they have an assured water supply by obtaining a commitment for
water service from a municipal provider that the Department has designated as having an
assured water supply. Once a municipal provider is designated as having an assured water
supply, rules require that the municipal provider use only a limited amount of groundwater
and eventually convert to renewable water sources to meet customers’ needs. Statutes and
rules, however, do not require nondesignated providers to convert from groundwater to
renewable water sources to meet customers’ needs.
Groundwater Users Will Continue
to Use More Groundwater
Than Is Replaced
Within the three safe yield AMAs, all water-using sectors (municipal, agricultural, and in-dustrial)
are dependent on groundwater to some degree. Users in all three AMAs are con-tinuing
to deplete groundwater supplies, and current projections indicate that none of the
three AMAs will achieve safe yield by 2025.
Water-using sectors depend on groundwater to varying degrees—The Groundwater Code
divides water users into three sectors with varying degrees of reliance on groundwater. The
three sectors are as follows:
n The municipal sector is comprised of cities, towns, and private water companies that
deliver groundwater for residential and commercial uses.
n The agricultural sector is comprised of farm land that uses groundwater from grandfa-thered
rights to irrigate crops.
n The industrial sector uses groundwater supplied by grandfathered rights and with-drawal
permits for such things as sand and gravel facilities, dairy and feedlot operations,
and landscape and turf watering.
Within the Prescott, Phoenix, and Tucson AMAs combined, agriculture took 52 percent of
the total groundwater used in 1995, industries took 12 percent, and municipalities took 36
percent, as illustrated in Figure 2 (see page 15).
15
Figure 2
Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Reliance on Groundwater by Water-Management Sectors
Year Ended December 31, 1995
The degree to which each water-using sector relies on groundwater, as opposed to renew-able
water sources, such as lakes, rivers, or treated effluent, varies by AMA. Table 2 on page
16 describes the water-using sectors’ varying dependence on groundwater in each of the
three AMAs.
Safe yield goal not likely to be achieved as groundwater depletion continues—The Prescott,
Phoenix, and Tucson AMAs are not approaching safe yield, as they continue to pump more
groundwater than is replaced. Although the Prescott and Phoenix AMAs have reduced the
amount of groundwater depleted yearly from 1990 to 1995, even these reductions have not
brought them substantially closer to achieving safe yield. The Tucson AMA has not been
able to achieve overall reductions at all; its amount of groundwater depletion actually in-creased
from 1990 to 1995. Additionally, the Department projects that all three AMAs will
continue to deplete groundwater, even while meeting all requirements of the Third Man-agement
Plans, and will not achieve safe yield by 2025. As mentioned previously, the De-partment
acknowledges that the statutory and regulatory frameworks to meet safe yield
have not been fully established. Further, the Third Management Plans are required to con-tinue
to focus on municipal conservation, even though, according to the Department, other
options to address water management problems should be evaluated.
Agricultural
Sector
52%
Industrial
Sector
12%
Municipal
Sector
36%
Source: The Prescott, Phoenix, and Tucson Active Management Areas’ Draft Third Management Plans provided
by the Arizona Department of Water Resources.
16
Table 2
Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Dependence on Groundwater by Sector
Year Ended December 31, 1995
Groundwater Use Percentage of
Area and Sector Acre Feet 1
Percentage
by Sector
Total from
Groundwater 2
Prescott Area
Municipal 10,303 64% 92%
Industrial 555 3 100
Agricultural 5,316 33 54
100
Phoenix Area
Municipal 247,750 31 29
Industrial 71,285 9 89
Agricultural 482,151 60 47
100
Tucson Area
Municipal 147,600 49 95
Industrial 59,400 19 99
Agricultural 96,200 32 98
100
1 An acre foot of water is approximately 326,000 gallons, which will supply the needs of nearly four people for one year.
2 This is the percentage of groundwater used compared to the total amount of water used and represents each sector’s
dependence on groundwater.
Source: The Prescott, Phoenix, and Tucson Active Management Areas’ Draft Third Management Plans provided by the
Arizona Department of Water Resources.
The Department projects that groundwater depletion will actually increase between 2000
and 2025 in the Phoenix and Prescott AMAs. The reasons for continuing depletion are
mainly population growth and the resulting increase in groundwater use by industries and
municipalities. For example, based on Department of Economic Security population projec-tions,
the Department estimates that the Phoenix AMA population will increase by 2 million
between 2000 and 2025, an increase of 68 percent; the Prescott AMA is estimated to increase
by over 46,000 for the same period, an increase of 46 percent. Groundwater depletion in the
Tucson AMA, however, is projected to decrease between 2000 and 2025 due to the munici-pal
sector’s use of Central Arizona Project water in place of groundwater. Table 3 on page 17
17
illustrates the amount of groundwater used by each AMA in excess of the amount replaced
in 1990 and 1995, as well as the Department’s projections for excess groundwater use
through 2025.
Table 3
Arizona Department of Water Resources
Three Safe Yield Active Management Areas’
Groundwater Depletion in Acre Feet
Actual Amounts in Years Ended December 31, 1990 and 1995
and Projected Amounts in Years Ended December 31, 2000 and 2025
Actual 1 Projected
Active
Management
Areas 1990 1995 2000 2025
Prescott 11,705 4,065 9,155 11,068
Phoenix 592,952 365,707 245,974 372,932
Tucson 134,200 163,900 168,500 49,000
1 Actual amounts in 1990 and 1995 are based on groundwater use reported by regulated users and calcula-tions
by the Department regarding the estimated amount of groundwater that was added to the aquifer in
each of these years.
Source: The Prescott, Phoenix, and Tucson Active Management Areas’ Draft Third Management Plans pro-vided
by the Arizona Department of Water Resources.
Commission Approach a Useful
Way to Address Safe Yield Issues
The Legislature should consider forming a study commission to address issues that affect
the State’s ability to achieve the safe yield goal. A study commission would be beneficial in
that it would allow for input from a wide cross section of water resource and water law ex-perts,
civic leaders, and other important interests such as municipalities, agriculture, and
mining that could be impacted by the State’s water resource policies. The study commission
could address the following issues:
n The advisability of purchasing and retiring grandfathered groundwater rights, and pos-sible
methods and timelines for doing so without adverse condemnation of individuals’
water rights. The Legislature has already given the Department statutory authority to
purchase and retire grandfathered groundwater rights. A.R.S. §45-611 allows the De-partment
to collect an annual fee from groundwater users, beginning in 2006, of up to $2
per acre foot of groundwater withdrawn in an AMA to purchase and retire grandfa-
18
thered rights. The fee alone, however, is not likely to generate enough money to pur-chase
a significant number of grandfathered rights, and the study commission should
therefore research additional methods for financing grandfathered rights purchases. In
addition, California has considered options for purchasing and retiring agricultural land
in order to acquire the water rights, and addressed the following concerns that the study
commission should address: 1) direct farm income losses; 2) secondary economic im-pacts;
and 3) indirect income and employment effects on industries that provide farms
with goods and services. The study commission should also address potential impacts to
the environment that may result if agricultural land is removed from production, as well
as the impact on recent initiatives to preserve open space.
n The advisability of either eliminating agricultural flexibility credits or preventing addi-tional
flexibility credits from accruing. The Groundwater Code established agricultural
flexibility credits to allow farmers to better respond to climatic variations and market
fluctuations, but did not establish a maximum credit balance that may be accrued. By
contrast, the Department established a flexibility credit program in the Second Manage-ment
Plans for municipal groundwater providers that allows water providers to accu-mulate
credits only up to an established maximum balance. In addition to the possibility
of eliminating credits, the study commission should review the municipal program’s re-quirements
and credit limits for possible use in the agricultural program to prevent ad-ditional
agricultural credits from accruing.
The study commission could also study the impact of recent legislative changes on the
accrual of credits. In 1998, the Legislature modified A.R.S. §45-566.02 to allow the De-partment
to establish an alternative agriculture conservation plan for the Third Man-agement
Plan period (2000-2010), based on crops grown and other factors, including ir-rigation
efficiency. The Department is planning to develop the alternative conservation
program as a modification to the Third Management Plans, after the Plans’ adoption.
Therefore, it is not yet possible to estimate the impact of this program on the accrual of
future flexibility credits.
n The advisability of limiting groundwater withdrawal permits and possible methods for
doing so. The Groundwater Code currently requires the Department to issue permits for
mineral extraction and general industrial uses if certain criteria are met. However, the
established criteria give the Department little authority to deny applications. The study
commission should research modifying the Code to allow the Department more author-ity
to deny withdrawal permit applications to limit the number that are issued.
n Possible methods for encouraging municipal providers to convert to renewable water
sources. One possible way of encouraging conversion to renewable sources is to provide
additional technical assistance to municipal providers. The study commission should re-search
the merits of the Department assisting municipal providers with cost-benefit
analysis or rate modeling of capital and operating expenditures related to the financing
and acquisition of renewable water sources. Valid financial data on water rate alterna-
19
tives would then be available to municipal officials, as they study the policy options that
would enable conversion to renewable water supplies.
Recommendation
1. The Legislature should consider establishing a study commission to address the follow-ing
issues:
a. Possible options and a timeline over which to finance, purchase, and retire grandfa-thered
groundwater rights;
b. Possible options to address the continuing accrual of agricultural flexibility account
credits;
c. Possible options for limiting the number or use of groundwater withdrawal permits;
and
d. Possible methods to encourage municipal water providers to rely on renewable wa-ter
sources.
20
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21
FINDING II
REGULATORY LIMITATIONS MAY CREATE
WATER SUPPLY PROBLEMS AS THE
POPULATION INCREASES
Although most of the State currently has a sufficient water supply, limitations in the regu-latory
structure may result in present and future water supply shortages. While consumers
in the Active Management Areas (AMAs) have assurances that future development can oc-cur
only if sufficient water supplies are available, similar assurances are not in place in areas
outside the AMAs.
Water resource problems that are currently minor may, in the coming decades, become
major problems as the population and demand for water increase. Arizona currently has
more than enough water due to the completion of the Central Arizona Project (CAP) and
delivery of Colorado River water to the State. Additionally, the Department projects that
most areas of the State will have enough water available for the next 40 years. However, the
plentiful water supply will not last indefinitely. The Department of Economic Security proj-ects
that the State’s population will more than double during the next 40 years and the De-partment
of Water Resources projects that demand for water will increase by about 15 per-cent
during that time. Since water in the State is a limited resource, shortages may develop
or become more pervasive. For example, the Sierra Vista area is currently experiencing
groundwater depletion, while Lake Havasu City could develop a water shortage as early as
2000.
Consumers Outside the
AMAs Have Less Assurance
of Water Supply
Limited consumer protections in areas outside of the AMAs provide residents with less as-surance
of a future water supply than their counterparts within the AMAs. Consumer pro-tection
is weaker in three ways. First, the adequate water supply provision, applicable to
areas outside of the AMAs, requires only that the first purchaser of a new subdivision lot
receive notification of the sufficiency of the water supply. Second, assured water supply
provision, which prohibits the development and sale of new subdivisions that do not have a
sufficient water supply, applies only to the AMAs. Third, well spacing is regulated in the
AMAs but is not regulated in areas outside of the AMAs. The limited consumer protections
in areas outside of the AMAs raise several concerns regarding the water supply on which
homeowners rely.
22
Less assurance of sufficient water—The adequate water supply provisions for areas outside
of the AMAs require only that the original purchaser be notified of the sufficiency of the
water supply, whereas the assured water supply provision for the AMAs prohibits the
creation of new subdivisions that have insufficient water. The adequate water supply provi-sion,
applicable to areas outside of the AMAs, requires subdivision developers to report on
the sufficiency of the water supply, but does not prohibit the development or sale of subdi-vision
lots in the absence of sufficient water. If the Department determines that the water
supply is insufficient, the developer is required only to notify potential buyers by displaying
the water supply information in promotional materials and subdivision lot sales contracts.
Additionally, it appears that only the original purchaser is entitled to notification regarding
the water supply, as there is no requirement that the water supply information be disclosed
to purchasers when the subdivision lot is resold.
In contrast, the assured water supply provision, applicable within the AMAs, requires that
new subdivisions have a sufficient quantity of water continuously available to meet the
proposed subdivision’s needs for at least 100 years. The provision prohibits the develop-ment
or sale of subdivisions that do not have a sufficient water supply, thereby protecting
consumers from purchasing a subdivision lot with insufficient water to meet their needs.
The Department of Economic Security projects that by 2025 there will be approximately
500,000 additional people living in areas of the State outside of the AMAs. As only the origi-nal
purchaser of a subdivision lot in areas outside of the AMAs receives information re-garding
the sufficiency of the water supply, subsequent purchasers may not know that the
water supply is insufficient. A partial solution would be recording the sufficient water sup-ply
determination with the County Recorder’s Office. While this would not require that
subsequent purchasers receive notification regarding the sufficiency of the water supply, it
would provide notification during a title search. Therefore, the Legislature should consider
amending A.R.S. §32-2181(F) to require that subdivision developers record with the appro-priate
County Recorder’s Office the Department’s determination of the sufficiency of the
subdivision’s water supply.
However, even with increased notification of the sufficiency of the water supply, some new
residents in areas outside of the AMAs could still find themselves with insufficient water to
meet their needs. The lack of an assured water supply provision in areas outside of the
AMAs allows the development and sale of new subdivisions that do not have sufficient
water. Therefore, new residents may be using an insufficient water supply, and may deplete
the water upon which existing residents rely. To provide greater protection, the Legislature
should consider amending A.R.S. §45-576 to extend the assured water supply provision to
areas of the State outside of the AMAs. If this provision were extended to the areas outside
the AMAs, there would be no need to amend A.R.S. §32-218(F) to require developers to rec-ord
the Department’s determination of the sufficiency of the water supply.
Well spacing and impact is unregulated—The Department does not regulate the spacing
between wells or the impact that a new well will have on existing wells in areas outside the
23
AMAs. The Groundwater Code requires filing a notice of intent to drill a well, but does not
require minimum spacing between wells, or prohibit new wells that will deplete the water
supply of existing wells. In contrast, within the AMAs, statutes and rules require that the
concentration of wells not cause unreasonable damage to surrounding land or other water
users. The Department will not authorize a new well to be drilled within the AMAs if it will
excessively decrease the water supply of an existing well.
As growth occurs in areas outside of the AMAs without renewable water supplies, most
new residents will drill wells to obtain groundwater. If additional wells deplete the water
supply, new homeowners, existing residents, municipalities, and industry will be affected;
consequently, the Legislature should consider amending A.R.S. §45-598 to give the Depart-ment
limited authority to establish well spacing requirements in areas outside of the AMAs.
If the current well spacing requirements were established in areas outside of the AMAs,
there would be no effect on exempt well applicants.1 All individuals in the State who want a
new or replacement exempt well, whether residing within or outside of AMAs, must file a
notice of intent to drill with the Department. The Department said it would not have any
additional resource requirements to administratively review the exempt well form applica-tions
for areas outside AMAs, as they currently perform this function statewide.
Non-exempt well applicants outside AMAs would be affected if well spacing requirements
were established.2 If current well spacing requirements were established outside of the
AMAs, the Department recommends that an independent hydrologic study be prepared by
the applicant or their consultant for all new non-exempt wells outside AMAs, regardless of
planned pumping capacity. Under the current procedures within AMAs, Department staff
conduct, at no cost to the applicant, well-impact analyses for non-exempt wells that pump
greater than 35 and fewer than 500 gallons per minute.3 The Department performs these
analyses because of the minimal number of well applicants in this category. However, for
non-exempt wells that pump 500 gallons or more within AMAs, an independent hydrologic
study is required to be furnished by the applicant at a cost of $2,000 to $4,000, based on De-partment
estimates.
According to the Department, in 1998 it received approximately 350 applications for non-exempt
wells to be drilled outside of the AMAs. About 200 of these wells, or approximately
60 percent, had planned pumping capacities of fewer than 500 gallons per minute. The De-
1 Exempt wells, typically for residential use, have a pumping capacity of 35 gallons per minute or less.
2 Non-exempt wells, typically for municipal industrial, turf/recreational and irrigation uses, have a
pumping capacity greater than 35 gallons per minute.
3 The purpose of a well-impact analysis is to protect nearby, already established wells. New non-exempt
wells may not create greater than a 10 foot draw-down over 5 years (2 feet per year) without
permission of any impacted well owners. According to the Department, applicants often reduce their
planned pumping volumes to avoid this impact.
24
partment indicates it could not conduct the analyses for these non-exempt wells because the
Department may not have the geological and hydrological data required to perform the
studies. Instead, the applicants would have to furnish the necessary studies.
Finally, to perform the additional workload for reviewing well-impact studies of non-exempt
wells outside AMAs, the Department estimates that two hydrologist positions and
one water resource specialist position would be required to review the new non-exempt
well applications and their hydrologic studies.
Recommendations
1. The Legislature should consider amending A.R.S. §45-576 to extend the assured water
supply requirements to areas of the State outside of the AMAs.
2. If the Legislature does not amend A.R.S. §45-576, then it should consider amending
A.R.S. §32-2181(F) to require that subdivision developers record with the appropriate
County Recorder’s Office the Department’s determination of the sufficiency of the sub-division’s
water supply.
3. The Legislature should consider amending A.R.S. §45-598 to provide the Department
with limited authority to establish well spacing requirements in areas of the State outside
of the AMAs.
25
OTHER PERTINENT INFORMATION
During the course of the audit, other pertinent information was developed relating to the
State’s water regulatory framework, which does not regulate all types of water.
Arizona Does Not
Regulate All Types
of Water
Currently, Arizona’s water regulatory framework treats surface water, groundwater, and
effluent (treated wastewater) as different types of water. The Department has no enforce-ment
authority over surface water and no statutory authority to manage effluent.
Surface water, groundwater, and effluent are treated as different types of water with vary-ing
levels of management and conservation requirements. The Department manages
groundwater pursuant to the Groundwater Code the Legislature established in 1980. The
Groundwater Code requires the Department to implement mandatory conservation re-quirements
for most groundwater users in the Active Management Areas. In contrast, the
Department does not have enforcement authority to require the conservation or efficient use
of surface water. Since before statehood, most surface water has been governed by the doc-trine
of prior appropriation, which states that the first person to put the water to a beneficial
use has the right to continue using that water. The Department issues certificates to appro-priate
surface water, but has no authority to manage or enforce the water’s use pursuant to
those certificates. Further, the Department does not have statutory authority to manage the
use of effluent. A 1989 Arizona Supreme Court case concluded that effluent is unregulated
and that the entity that created the effluent has control over its use.1 The Court, however,
also concluded that effluent is potentially a valuable water resource, and encouraged the
State to enact laws for its regulation. Until the Department has statutory authority to man-age
effluent’s use, it cannot require that effluent be conserved or used efficiently. Only about
one-third of the effluent that is produced in the State each year is put to a direct use such as
turf irrigation or groundwater recharge.
Although some areas of the State are already facing surface water shortages, the Depart-ment
has limited authority to respond. For example, Lake Havasu City is totally dependent
on surface water and may exceed its annual water allotment and face a water shortage by
2000. The Department has recommended, but has no statutory authority to mandate, that
the City develop aggressive surface water conservation programs in order to stay within its
annual water allotment and avoid future shortages.
1 Arizona Public Service Company, et al v. Long, et al, 160 Ariz. 429, 773 P.2d 988 (1989).
26
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27
SUNSET FACTORS
In accordance with A.R.S. §41-2954, the Legislature should consider the following 12 factors
in determining whether the Arizona Department of Water Resources (Department) should
be continued or terminated.
1. The objective and purpose in establishing the agency.
The Department of Water Resources was established on June 12, 1980, when the
Groundwater Code became law. The goal of the Groundwater Code is twofold: 1) to
control severe groundwater depletion and 2) to provide the means for allocating Ari-zona’s
limited groundwater resources to meet the State’s changing water needs.
To further refine the legislative mandate, the Department developed a mission
statement as follows:
To ensure a long-term sufficient and secure water supply for the state; to develop pub-lic
policy which promotes efficient use and equitable distribution of water in an envi-ronmentally
and economically sound manner; and, to promote the management of
floodplains and dams to reduce loss of life and damage to property.
2. The effectiveness with which the agency has met its objective and purpose
and the efficiency with which it has operated.
The Department has generally been effective in implementing its water management
responsibilities. Regarding groundwater management, the Department has promul-gated
the first two Management Plans and is currently promulgating the Third Man-agement
Plan containing conservation programs for the municipal, agricultural, and
industrial sectors for implementation in 2002. The Management Plans comply with
the Groundwater Code’s requirements. Further, the Department was involved in the
creation of the Central Arizona Groundwater Replenishment District in 1993. The
Central Arizona Groundwater Replenishment District gives municipal providers or
subdivisions a means to replenish groundwater that is withdrawn in excess of the
amount of groundwater allocated to them. Other important areas of involvement in-clude
the creation of the Santa Cruz Active Management Area in 1994, along with the
preparation of the Arizona Statewide Water Resources Assessment, a water planning
document.
28
However, the Department needs to review its efficiency in processing permits. Vari-ous
parties expressed concern with the amount of time it takes the Department to
process water recharge and other permits. The Department should consider process-improvement
efforts through the assistance of the Office of Excellence in Govern-ment.
3. The extent to which the agency has operated within the public interest.
The Department has operated within the public interest by administering the
Groundwater Code and implementing groundwater conservation programs. Other
programs that benefit the public are ensuring safe dams, flood mitigation, well reg-istration,
and the collection of hydrology data to make better-informed water man-agement
decisions.
4. The extent to which rules adopted by the agency are consistent with the legis-lative
mandate.
At the request of the Office of the Auditor General, the Governor’s Regulatory Re-view
Council (GRRC) reviewed the Department’s statutes and determined that the
Department has not promulgated all rules mandated by statutes. The Department
should work with GRRC to adopt the rules required by A.R.S. §45-605(E) relating to
new or replacement wells and A.R.S. §45-1451(C)(8) relating to monies appropriated
for flood control. Currently, pursuant to A.R.S. §45-1212(A), the Department is in the
process of receiving public comments on a rule package regarding the maintenance
and operation of dams.
5. The extent to which the agency has encouraged input from the public before
adopting its rules, and the extent to which it has informed the public as to its
actions and their expected impact on the public.
The Department adequately encourages public input when amending the Manage-ment
Plans and when promulgating rules. The Department uses the statutorily re-quired
notices for public comment and public hearings before formal adoption of
rules. According to the Department, in some cases it has delayed rules package im-plementation
to allow for adequate public involvement. Further, the public is kept
informed of departmental activities through a Web page on the Internet and through
the publication of various public information materials. Finally, the Department, its
commissions, and its advisory councils are in compliance with the Open Meeting
Law requirements, including posting public meeting notices at least 24 hours in ad-vance
at the required location.
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6. The extent to which the agency has been able to investigate and resolve com-plaints
that are within its jurisdiction.
Generally, the Department has the authority to investigate and resolve complaints
relating to Groundwater Code violations; however, the Department lacks authority
over surface water violations. Pursuant to A.R.S. §§45-632 through 45-636, the De-partment
has authority over Groundwater Code violations, including well inspection
activities and the issuing of cease-and-desist orders for Code violations. The Depart-ment
maintains a registry of surface water rights holders. However, if surface water
rights are contested, the Department has no authority to resolve the dispute. This
authority resides with the courts.
When the Department receives complaints on open wells, it evaluates and classifies
the open well into one of four categories, depending on the threat to public safety.
According to Department policy, open wells that pose an immediate threat to public
safety are classified as an emergency hazard and are secured either by the property
owner or the Department within a 48-hour period.
7. The extent to which the attorney general or any other applicable agency of
state government has the authority to prosecute actions under the enabling
legislation.
Pursuant to A.R.S. §45-104, the Department is authorized to employ its own legal
counsel to advise and represent the Department in connection with legal matters be-fore
other departments and agencies of the State. This special circumstance is al-lowed
primarily to avoid legal conflicts on water rights issues with other Arizona
natural resource agencies also represented by the Attorney General, such as the State
Land Department. The Department’s legal counsel also represents the Department in
litigation concerning department affairs. The Department’s legal counsel does not
prosecute criminal violations of the State’s surface water laws nor does it represent
the Department in civil tort actions. Further, the Attorney General provides assis-tance
to the Department in litigation relating to noncriminal offenses.
8. The extent to which the agency has addressed deficiencies in its enabling
statutes which prevent it from fulfilling its statutory mandate.
The Department has sought and accomplished numerous technical changes to the
Groundwater Code. Annually, the Department supports a water omnibus bill to re-vise
Title 45 and other water-related titles in the Arizona Revised Statutes to correct
errors, clarify existing provisions, streamline administrative processes, and address
other pertinent issues in response to the water community’s changing needs. For ex-ample,
legislative changes in past bills included clarification of plumbing fixture
standards and the establishment of an emergency temporary well permit process for
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recovery of Central Arizona Project water during a short-term, unplanned canal de-livery
stoppage. Further, the most recent bill established a Department Production
and Copying Fund.
However, as discussed in Finding I (see pages 9 through 19), the Groundwater Code
contains a number of statutory restrictions and exemptions that inhibit the AMAs’
ability to achieve the safe yield goal. When the Code was created in 1980, it estab-lished
grandfathered rights that allowed all historic groundwater users to continue
using groundwater. The Code also established a flexibility account that allows agri-cultural
users to accrue credits for unused groundwater. Further, the Code created
groundwater withdrawal permits that allow groundwater use by users without a
grandfathered right. Finally, provisions in the Code relating to the municipal sector
also contribute to continued groundwater depletion. Legislative changes have not
been enacted as necessary to achieve the safe yield goal, including expanding the
Department’s authority to require historic groundwater users within AMAs to re-duce
their reliance on groundwater and/or convert to renewable water supplies,
eliminating or preventing additional agricultural flexibility credits from accruing, or
giving the Department additional authority to limit groundwater withdrawal per-mits.
Further, as discussed in Finding II (see pages 21 through 24), consumers in areas of
the State outside of the AMAs have less assurance of future water supply than their
counterparts in the AMAs. New subdivisions can be built even if there is not a suffi-cient
water supply. Further, only the first purchaser is informed of the sufficiency of
the water supply. However, in AMAs, statutes prevent a subdivision from being de-veloped
if there is not a 100-year assured water supply. Finally, well spacing in the
non-AMAs is not regulated. The Department has not sought legislative changes to
better enable subsequent purchasers to know the sufficiency of the water supply or
to require areas outside of AMAs to demonstrate an assured water supply before
building new subdivisions, and to regulate well spacing.
9. The extent to which changes are necessary in the laws of the agency to ade-quately
comply with the factors listed in the Sunset Law.
As discussed in Finding I (see pages 9 through 19), the Legislature may wish to es-tablish
a study commission to address several key policy issues that would assist the
AMAs in accomplishing the safe yield goal. As discussed in Finding II (see pages 21
through 24), the Legislature should consider amending A.R.S. §32-2181(F) to require
developers in areas outside of the AMAs to record with the appropriate County Re-corder’s
Office the Department’s determination regarding the sufficiency of the sub-division’s
water supply. However, to provide even greater assurance of a sufficient
water supply, the Legislature should consider amending A.R.S. §45-576 to extend
the assured water supply requirements to areas outside of the AMAs.
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Finally, as also discussed in Finding II (see pages 21 through 24), the Legislature
should consider amending A.R.S. §45-598 to provide the Department with limited
authority to establish well-spacing requirements in areas outside of the AMAs.
10. The extent to which termination of the agency would significantly harm the
public health, safety, or welfare.
Terminating the Department could cause a significant amount of harm to the public’s
health, safety, and welfare. The 1980 Groundwater Code recognized that it is in the
interest of the “general economy and welfare of this state and its citizens” to provide
a framework for the comprehensive management and regulation of the use of
groundwater. The Department accomplishes this mandate through water rights allo-cation
and the oversight of interstate compacts. Further, the five Active Management
Areas have groundwater management goals that are intended to conserve ground-water
for future use. The Department has developed conservation plans for munici-palities,
agriculture, and industry in an effort to achieve the goals for each Active
Management Area. Finally, the Department also has a vital public health and safety
role in ensuring the safety of dams and responding to identified unsafe well condi-tions.
According to the Department, there are some areas of overlap between it and other
state agencies in the Department’s role of protecting the public. For example, the De-partment
of Environmental Quality regulates water quality while the Department of
Water Resources provides hydrologic expertise about water quantity. There is also
overlap between the Department and the State Mine Inspector regarding jurisdiction
over dams located on mining properties.
11. The extent to which the level of regulation exercised by the agency is appro-priate
and whether less or more stringent levels of regulation would be appro-priate.
As discussed in Finding II (see pages 21 through 24), amending A.R.S. §45-576 to ex-tend
the assured water supply requirements to areas outside of the AMAs and
amending A.R.S. §45-598 to give the Department limited regulatory authority to es-tablish
well spacing requirements in the areas of the State outside of the AMAs may
be appropriate.
The Department’s level of regulation appears appropriate for the 77 types of licenses
it currently issues. The Department regulates a wide range of activities including
water rights, the transportation and storage of water, and the regulation of wells and
well drillers.
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12. The extent to which the agency has used private contractors in the perform-ance
of its duties and how effective use of private contractors could be ac-complished.
According to the Department, its regulatory and planning nature reduces the op-portunity
to use private contractors. However, the Department does use private
contractors for development of computer technologies and for short-term projects
where the agency lacks the necessary technical expertise. Further, the Department
could consider either adding an economist position or contracting with an economic
consulting firm to conduct cost/benefit studies of proposed regulations and perform
rate modeling related to the financing and acquisition of renewable water sources.
Agency Response
(This Page Intentionally Left Blank)
JANE DEE HULL
Governor
RITA P. PEARSON
Director
ARIZONA DEPARTMENT OF WATER RESOURCES
500 North Third Street, Phoenix, Arizona 85004
Telephone (602) 417-2410
Fax (602) 417-2415
April 19, 1999
Douglas R. Norton, Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
Dear Mr. Norton:
This letter is the Department’s response to the performance audit of the Arizona Department of
Water Resources by the Office of the Auditor General.
The Department appreciates the efforts of the Office of the Auditor General in preparing the
performance audit of the Department of Water Resources. Additionally, there are no significant
differences between the conclusions of your agency and the position of the Department. With
respect to the recommendations of the report, the following is submitted for your consideration:
1. Recommendation to Establish a Groundwater Code Study Commission. The finding of
the Auditor General is agreed to and a different method of dealing with the finding will
be implemented. The Department concurs that the recommendation is extremely
important and, rather than wait, the Department has initiated an effort to generate a
statewide task force to address the issues outlined in the recommendation.
2. Recommendation that the Legislature should consider increased consumer protections
and give greater assurances of a long-term reliable water supply to residents outside of the
Active Management Areas (AMAs). The finding of the Auditor General is agreed to and
the audit recommendations will be implemented, subject to statutory authority approved
by the Governor and the Arizona Legislature. The recommendations of the audit will
require significant study to determine the economic cost benefit of amending A.R.S. § 45-
576 to extend the assured water supply requirements to areas outside of the AMAs and to
amend A.R.S. § 45-598 to provide the Department with limited authority to establish well
spacing requirements in areas of the State outside of the AMAs.
Thank you for the opportunity to comment on the performance audit of the Department. If I can
provide any additional information, please contact me directly at 417-2410.
Sincerely,
Rita P. Pearson
Director
RPP:kad