Performance audit, Department of Water Resources, Arizona Water Commission

              DOUGLAS R NORTON, CPA

AUDITOR GENERAL

STATE OF ARIZONA

OFFICE OF THE

AUDITOR GENERAL

LINDA J. BLESSING, CPA

DEPUTY AUDITOR GENERAL

August 31 , 1989

Members of the Arizona L e g i s l a t u r e

The Honorable Rose Mofford, Governor

Mr. William Plummer, Director

Department of Water Resources

Mr. Pete Shumway , Chai rman

The Arizona Water Commi ssion

Transmitted herewith i s a report of the Auditor General, a Performance

Audit of the Department of Water Resources and Arizona Water Commission.

This report i s i n response to a June 2, 1987, r e s o l u t i o n of the J o i n t

L e g i s l a t i v e Overstght Commi t t e e .

The report addresses problems w i t h the groundwater code including i t s

safe- yreld, assured water supply and municipal conservation p r o v i s i o n s .

The report concludes that more e f f o r t i s needed t o protect the p u b l i c

from hazardous open wells. The r e p o r t a l s o i d e n t i f i e s areas i n which

several m ~ l l i o n d o l l a r s could be saved annually by r e q u i r i n g those

primari ly b e n e f i t t i n g from services to pay a greater share of the

prograin's costs. F i n a l l y , the report concludes that the Arizona Water

Commission should be allowed to terminate under the provisions of the

Sunset Law and be replaced w i t h an advisory council w i t h statewide

membership.

My s t a f f and I w i l l be pleased t o discuss or c l a r i f y items i n the r e p o r t .

Sincerely,

DRN : l mn

STAFF: William Thomson

Peter N. Francis

Arthur E. H e i k k i l a

Anthony James Guarino

Margaret McNamara Jackson

~ o&$ as R . Nor ton

Auditor General

2700 NORTH CENTRAL AVE, 0 SUITE 700 0 PHOENIX, ARIZONA 85004 O ( 602) 255- 4385

S MA4 ARY

The Office of the Auditor General has conducted a Sunset Review of the

Arizona Department of Water Resources i n response to a June 2, 1987,

resolution of the Joint Legislative Oversight Committee. This

performance audit was conducted as part of the Sunset Review set f o r t h i n

Arizona Revised Statutes ( A. R. S.) 9941- 2351 through 41- 2379.

The Department of Water Resources ( DWR) was established in 1980 when the

Groundwater Management Act became law. DWR administers a l l State water

law except those laws r e l a t i n g t o water qua1 i t y . Primary

r e s p o n s i b i l i t i e s include implementing the groundwater code, supporting

the adjudication of water r i g h t s , ensuring safety of dams, implementing

surface water law, surveying water resources statewide, and assessing

water q u a l i t y i n conjunction with the Department of Environmental

Quality. DWR i s funded p r i m a r i l y through general fund appropriations.

The Legislature appropriated approximately $ 12.7 mi I I ion and 223

f u l I- time equivalent s t a f f to DWR for f i s c a l year 1988- 89.

To Help Ensure More E f f e c t i v e Water Management, the Legislature Should

Address Several Problems That Have Surfaced Since the Groundwater Code's

Inception i n 1980 ( see pages 13 through 21)

The Legislature should consider addressing problems that have developed

since the groundwater code was enacted. Although the code r e f l e c t s

Arizona's need for strong water regulation and has resulted i n better

water management, several key provisions of the code may not always

provide for e f f e c t i v e water management. For example, the code's

safe- yield goal may not be a r e a l i s t i c or appropriate basis for

planning. I t i s u n l i k e l y that either Phoenix or Tucson w i l l reach

safe- yield by 2025 because the potential for further water conservation

and augmentation i s l i m i t e d . Further, achieving safe- yield may not even

be necessary because of the several hundred years worth of water i n

storage beneath both metropolitan areas.

In addition, p o t e n t i a l problems exist with the code's assured water

supply provision and municipal conservation measure. The assured water

supply provision could work against the code's safe- yield goal because i t

authorizes developers to use a d d i t i o n a l groundwater. The municipal

conservation measure may not t r u l y r e f l e c t c i t i e s ' e f f o r t s to conserve

groundwater because i t includes surface whier i n the measurement c r i t e r i a .

Other issues that might need to be reviewed include developing a more

comprehensive water management program; p r o v i d i n g i n c e n t i v e s for using

water other than groundwater; providing for increased water marketing

f l e x i b i l i t y ; and possibly e s t a b l i s h i n g metropolitan water d i s t r i c t s to

enhance water management i n large urban areas.

A Stronger Enforcement Program May Be Needed ( see pages 23 through 26)

A more e f f e c t i v e enforcement program may be needed. Adequate enforcement

of groundwater use i s necessary to ensure that groundwater users are not

using more groundwater than a l l o t t e d so that long- term water management

goals are reached. DWR review of annual groundwater w i thdrawal reports

has i d e n t i f i e d over 900 p o t e n t i a l v i o l a t o r s i n 1987 i n the Phoenix area

alone. Even more v i o l a t i o n s may be occurring because DWR's detection

methods are not comprehensive. Further, more s t r i n g e n t conservation

requirements i n the future may create an added incentive for increased

noncompliance. DWR w i l l need to study the extent of noncompliance and

underreporting, and determine whether a d d i t i o n a l s t a f f and stronger

enforcement e f f o r t s are needed.

More Effort I s Needed to Protect the Public from Hazardous Open Wel Is

( see pages 27 through 33)

In October 1988, an elementary school teacher from the town of Maricopa

reported a hazardous open we1 l near her school. The we1 l was three f e e t

i n diameter, 600 feet down to water, and unobstructed ( nothing to break a

f a l l ) . School c h i l d r e n were playing by the w e l l , dropping rocks i n t o

i t . This well i s j u s t one of what DWR estimates could be hundreds of

hazardous open wells i n the State. DWR has documented approximately 700

open we1 I s i n Arizona. Many of these we1 Is are hazardous because of the

p o t e n t i a l f o r people f a l l i n g i n and/ or because of the p o l l u t a n t s ( such as

f e r t i l i z e r s and p e s t i c i d e s ) entering the a q u i f e r . DWR estimates that

thousands more open wells are undiscovered.

Because these wells present a s i g n i f i c a n t health and s a f e t y t h r e a t to the

p u b l i c , more e f f o r t i s needed to address t h i s hazard. Although given the

r e s p o n s i b i l i t y for open well enforcement i n 1986, DWR does not have

s u f f i c i e n t s t a f f to perform the work. DWR estimates that i n i t i a l l y an

additional $ 240,000 i n c l u d i n g e i g h t s t a f f w i l l be needed. To support

increased open well enforcement, DWR and the L e g i s l a t u r e should consider

e i t h e r establishing a self- supporting funding method, using any a v a i l a b l e

DWR enforcement fund monies, or appropriating general fund monies.

The State Could Save A t Least $ 1.5 M i l l i o n Annually by Increasing the

Groundwater Withdrawal Fee ( see pages 35 through 36)

Though State law mandates that groundwater user fees finance h a l f the

cost of groundwater code regulation, a separate s t a t u t o r y provision

r e s t r i c t s DWR's a b i l i t y to do t h i s by l i m i t i n g the maximum fee amount to

one d o l l a r per acre- foot of groundwater used. As a r e s u l t , for f i s c a l

year 1990 an estimated $ 1.5 mi l l ion i n general fund monies w i l l be needed

to compensate for the s h o r t f a l l i n user fees. The L e g i s l a t u r e should

consider r a i s i n g the fee to provide s u f f i c i e n t monies for groundwater

code regulation.

Water Rights Claimants Should Support a Greater Share of the

Adjudications Costs ( see pages 37 through 43)

Claimants p r i m a r i l y b e n e f i t i n g from the adjudications of surface water

r i g h t s i n Arizona should support a greater p o r t i o n of the o v e r a l l cost.

DWR serves as the technical arm of the courts which are now a d j u d i c a t i n g

( or determining the nature, extent, and p r i o r i t y o f ) a l l r i g h t s to water

on the Gila River and L i t t l e Colorado River watersheds. While the

statutes provide for recovery of DWR's cost of legal process and service,

a l l of the agency's other a d j u d i c a t i o n a d m i n i s t r a t i v e expenses are

supported from the general fund. These expenses are substantial and w i l l

occur for at least the next ten years. DWR i s expected to spend nearly

$ 1.8 mi l l i o n i n general fund monies for these expenses i n f i s c a l year

1989.

The Legislature could amend current statutes to a l l o w f o r a more

equitable sharing o f DWR's adjudications costs between the State and

claimants. Precedents e x i s t i n both Arizona and other s t a t e s f o r greater

cost- sharing. Idaho, for example, has established a f u l l y

self- supporting adjudications process.

TABLE OF CONTENTS

' Page

INTRODUCTION AND BACKGROUND . . . . . . . . . . . . . . . . . . . . 1

SUNSETFACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

FINDING I: TO HELP ENSURE MORE EFFECTIVE WATER MANAGEMENT,

THE LEG l SLATURE SHOULD ADDRESS SEVERAL PROBLEMS

THAT HAVE SURFACED SINCE THE GROUNDWATER CODE'S

INCEPTIONIN1980 . . . . . . . . . . . . . . . . . . . . . . . 13

Statutes Include Groundwater Code in Sunset Review. . . . . . . 13

Groundwater Code Is Needed and Has Provided

BetterWaterManagement . . . . . . . . . . . . . . . . . . . . 13

Several Code Provisions May Not Provide

f o r Effective Water Management. . . . . . . . . . . . . . . . . 14

Problems with Code and Other Water Management

Issues Need to Be Reviewed. . . . . . . . . . . . . . . . . . . 17

Recomnendation. . . . . . . . . . . . . . . . . . . . . . . . . 20

FINDING I I : A STRONGER ENFORCEMENT PROGRAM MAY BE NEEDED . . . . . 23

Enforcement of Conservation Plans Is C r i t i c a l

for Successful Water Management . . . . . . . . . . . . . . . . 23

Numerous Violations Have

Been Identified . . . . . . . . . . . . . . . . . . . . . . . . 24

Limited Enforcement Capability and More Stringent

Requirements May Be a Formula for Future Noncompliance. . . . . 25

Recomnendations . . . . . . . . . . . . . . . . . . . . . . . . 26

FINDING Ill: WRE EFFORT IS NEEDED TO PROTECT THE

PUBLIC FROM HAZARDOUS OPEN WELLS. . . . . . . . . . . . . . . . 27

Large Numbers of Open Wel Is Present a

Significant Healthandsafety Hazard. . . . . . . . . . . . . . 27

More Effort Is Needed to Address

OpenWellHazards . . . . . . . . . . . . . . . . . . . . . . . 29

Open Well Enforcement Program Could

Be Funded Several Ways. . . . . . . . . . . . . . . . . . . . . 31

Recomnendations . . . . . . . . . . . . . . . . . . . . . . . . 32

Page

F l ND 1 NG I V: THE STATE COULD SAVE AT LEAST $ 1 - 5 MI LL l ON

ANNUALLY BY INCREASING THE GROUNDWATER

WITHDRAWALFEE. . . . . . . . . . . . . . . . . . . . . . . . . 35

A Provision i n the Groundwater Code Prevents

DWR from Collecting Sufficient Fees for

Administration and Enforcement. . . . . . . . . . . . . . . . . 35

A Change i n Statute Would Result i n

Only a Minimal Increase in Water Costs. . . . . . . . . . . . . 36

Recomnendation. . . . . . . . . . . . . . . . . . . . . . . . . 36

F l ND 1 NG V : WATER R l GHTS CLA l MANTS SHOULD SUPPORT A

GREATER SHARE OF THE ADJUDICATIONS COSTS. . . . . . . . . . . . 37

General Water Rights Adjudications. . . . . . . . . . . . . . . 37

Claimants W i l l Benefit from Adjudications . . . . . . . . . . . 38

Fees Collected Are Insufficient to

RecoverDWRCosts . . . . . . . . . . . . . . . . . . . . . . . 39

Statutory Revisions Could Require a

More Equitable Sharing of Costs . . . . . . . . . . . . . . . . 40

Reconmendations . . . . . . . . . . . . . . . . . . . . . . . . 43

AGENCY RESPONSE

APPEND I X

Legislative Council Opinion

LIST OF TABLES

TABLE 1 Department of Water Resources Statement of

Full- Time Equivalents and Actual and Budgeted

Expenditures Fiscal Years 1986- 87, 1987- 88, and

Budget Year 1988- 89 ( unaudited). . . . . . . . . .

INTRODUCTION AND BACKGROUND

The O f f i c e o f the Auditor General has conducted a Sunset Review of the

Arizona Department of Water Resources i n response to a June 2, 1987,

r e s o l u t i o n of the J o i n t L e g i s l a t i v e Oversight Committee. This

performance audit was conducted as p a r t o f the Sunset Review set f o r t h i n

Arizona Revised Statutes ( A . R . S. ) $ 341- 2351 through 41- 2379.

The Department of Water Resources ( DWR) was established on June 12, 1980,

when the Groundwater Management Act became law. The department

administers a l l State water laws except those d i r e c t l y r e g u l a t i n g water

q u a l i t y . Key p r o j e c t s c u r r e n t l y underway include: e s t a b l i s h i n g new

conservation requirements for a g r i c u l t u r a l , municipal, and i n d u s t r i a l

water users; developing a program to augment the water supply for

s p e c i f i e d areas w i t h i n the State; su. pporting the a d j u d i c a t i o n of water

r i g h t s ; dam safety; and assessing groundwater q u a l i t y i n cooperation w i t h

the Department of Environmental Q u a l i t y .

H i s t o r y Of Water Regulation I n Arizona

Arizona's surface water code was enacted i n 1919. Arizona State

government f i r s t became a d m i n i s t r a t i v e l y involved i n water management i n

1948 when the f i r s t groundwater code was enacted and the Arizona

l n t e r s t a t e Stream Commission was established to secure the S t a t e ' s r i g h t s

to water from the Colorado River and other i n t e r s t a t e streams. In

a d d i t i o n , the commission's r e s p o n s i b i l i t i e s included statewide water

resource p l ann i ng .

The S t a t e ' s r o l e i n water management has c o n t i n u a l l y expanded since that

time. I n 1971, the Arizona Water Commission ( AWC) replaced the

l n t e r s t a t e Stream Commission and was given a d d i t i o n a l r e s p o n s i b i l i t i e s

including: the supervision of dam s a f e t y f u n c t i o n s , watershed management,

hydrologic data c o l l e c t i o n , and licensing of weather m o d i f i c a t i o n

p r o j e c t s . Two years l a t e r the Legislature gave the AWC extensive flood

control r e s p o n s i b i l i t i e s . I n 1979, l e g i s l a t i o n was passed t r a n s f e r r i n g

the administration of water r i g h t s from the State Land Department to the

AWC, g i v i n g the commission t o t a l responsibi l i t y for water planning and

r e g u l a t i o n . The 1979 l e g i s l a t i o n also authorized the superior c o u r t t o

conduct the general a d j u d i c a t i o n of water r i g h t s and designated the AWC

as the technical arm o f the court.

In June 1980, the L e g i s l a t u r e passed the Groundwater Management Act. The

Groundwater Management Act created the Department of Water Resources, and

made the department the focal p o i n t f o r water management and regulation

i n the State. Under the provisions of the a c t , DWR became responsible

for the a d m i n i s t r a t i o n and enforcement of the groundwater code which sets

two primary goals for the State: 1) to control the severe overdraft of

groundwater, and 2) to provide a means for e f f e c t i v e l y a l l o c a t i n g the

S t a t e ' s l i m i t e d groundwater. In a d d i t i o n , the a c t t r a n s f e r r e d the powers

and duties of the Arizona Water Commission to DWR, reducing the

commission's role i n water management to that o f an advisory counci I .

The code provides for s t r i c t groundwater r e g u l a t i o n i n the four i n i t i a l l y

- establ i shed a c t i v e management areas ( AMA) : Phoenix, Tucson, Prescot t , and -

P i n a l . AMAs are designated geographical areas r e q u i r i n g increased

management of groundwater. The code requires a l l AMAs except Pinal to

attempt to achieve the AMA's goal of safe- yield water use by the year

2025. Safe- yield means using no more groundwater than i s replaced e i t h e r

n a t u r a l l y or a r t i f i c i a l l y . Because of i t s p r i m a r i l y a g r i c u l t u r a l nature,

Pinal i s allowed to gradually deplete i t s a q u i f e r s , but the AMA must

s t i l l maintain enough groundwater f o r f u t u r e n o n i r r i g a t i o n uses. The

code requires DWR to develop and implement a series of f i v e management

plans for each AMA over a 45- year period for the purpose of achieving the

safe- yield goal. Management plans must e s t a b l i s h conservation

requirements for a l l groundwater users and may contain other water

management requirements.

Organization and Personnel

The Department of Water Resources was allocated 223 f u l l - t i m e employees

i n f i s c a l year 1989. The agency i s divided i n t o f i v e o f f i c e s : the

D i r e c t o r ' s O f f i c e , the O f f i c e of Administrative Services, the O f f i c e of

Planning and Adjudications, the O f f i c e of Engineering, and the O f f i c e o f

Water Management.

The D i r e c t o r ' s Office - In a d d i t i o n to preparing the annual budget and

providing information and educational services to water users and the

pub1 i c , the D i r e c t o r ' s O f f i c e , consisting of 16 f u l I- time employees

( FTEs), also contains a legal d i v i s i o n . DWR i s not represented by the

Attorney General's O f f i c e ; t h e r e f o r e , the department's in- house legal

s t a f f provides a l l legal support on issues of water management. The

legal d i v i s i o n reviews c o n t r a c t s , represents Arizona on water r i g h t

matters related to the Colorado River, and i s a key player i n the

enforcement of the groundwater code and management p l ans .

The O f f i c e o f Administrative Services - This o f f i c e i s responsible for

departmental purchasing, accounting, p a y r o l l , personnel, and Management

Information Systems ( MIS) support. I t operates w i t h 31 FTEs.

The O f f i c e of Planning and Adjudications - The o f f i c e consists of two

d i v i s i o n s , Adjudications and Colorado River Management. The

Adjudications D i v i s i o n has an i n v e s t i g a t i o n s s e c t i o n , a l i t i g a t i o n

support section, and a technical support section. The i n v e s t i g a t i o n s

section investigates claims to surface water r i g h t s and produces the

hydrographic survey reports used by the courts i n determining r i g h t s i n

adjudicated watersheds. The l i t i g a t i o n support section mai Is dockets out

monthly to a l l claimants, and handles public i n q u i r i e s and a e r i a l

photography. F i n a l l y , the technical support section provides technical

support to the i n v e s t i g a t i o n s section. The Colorado River Management

D i v i s i o n plans for and monitors Colorado River and CAP water usage. The

45 FTEs of the O f f i c e of Planning and Adjudications perform these various

functions.

The O f f i c e o f Engineering - This o f f i c e consists of 58 FTEs and i s

divided i n t o the d i v i s i o n s of engineering, hydrology, and remedial

action. The engineering d i v i s i o n ensures dam safety for almost 200 dams

throughout the State, and a s s i s t s counties w i t h the planning of flood

control p r o j e c t s . The hydrology d i v i s i o n i s a support group which

c o l l e c t s and disseminates water data throughout the department. The r o l e

of the remedial action d i v i s i o n i s to coordinate water q u a l i t y issues

w i t h i n DWR and with the Department of Environmental Q u a l i t y .

The O f f i c e o f Water Management - The o f f i c e ' s primary responsibi l i t y i s

water r i g h t s a d m i n i s t r a t i o n . Operating w i t h 73 FTEs, the o f f i c e oversees

the a c t i v i t i e s of the department's four a c t i v e management areas of

Phoenix, Tucson, P i n a l , and Prescott. Each AMA has i n i t i a l

r e s p o n s i b i l i t y for developing conservation requirements, enforcing the

groundwater code and management plans, processing water r i g h t s , and

issuing water permits and t r a n s f e r s w i t h i n t h e i r geographic boundaries.

In a d d i t i o n , the o f f i c e contains a planning/ compliance d i v i s i o n t o insure

that AMAs operate i n a uniform manner, and an operations d i v i s i o n , which

p r i m a r i l y c o l l e c t s and f i l e s groundwater and surface water a p p l i c a t i o n s ,

permits, and r e g i s t r i e s .

Revenue and Expendi tures

Department functions are funded p r i m a r i l y through general fund

appropriations. This funding includes some special a p p r o p r i a t i o n s f o r

such purposes as f l o o d warning, f l o o d c o n t r o l plans, environmental

q u a l i t y , and groundwater recharge. In a d d i t i o n , the department receives

federal monies for various water- related programs. Moreover, the agency

maintains several special fund accounts. For example, an enforcement

fund, comprised primari l y of c i v i l penalties col lected from v i o l a t o r s of

the groundwater code, i s a v a i l a b l e f o r departmental enforcement e f f o r t s .

Table I ( page 5) summarizes actual and a n t i c i p a t e d agency expenditures

for f i s c a l years 1987 through 1989.

Audi t Scope and Purpose

Our a u d i t o f DWR concentrated on several water management issues.

Detailed work was conducted to determine:

r Whether the L e g i s l a t u r e needs to address several groundwater code

provisions and other water management issues.

r Whether a stronger enforcement program i s needed.

r Whether DWR needs t o devote greater e f f o r t to p r o t e c t i n g the p u b l i c

from open wells.

a Whether groundwater withdrawal fees should be r a i s e d t o cover h a l f

the costs of groundwater code a d m i n i s t r a t i o n and enforcement.

a Whether a d d i t i o n a l fees should be assessed to recover the

a d m i n i s t r a t i v e costs of water r i g h t s a d j u d i c a t i o n s .

TABLE I

DEPARTMENT OF WATER RESOURCES

STATEMENT OF FULL- TIME EQUIVALENTS AND ACTUAL AND BUDGETED

EXPENDITURES FISCAL YEARS 1986- 87, 1987- 88, AND

BUDGET YEAR 1988- 89

( unaudited)

Actual Actual Budgeted

1987 1988 1989

FTEs 217.2 223.2 223.2

Personal services $ 5,565,041 $ 6,065,395 $ 6,140,700

Employee- related expenditures 1,132,561 1,161,216 1 ,426,300

Professional and

outside services 585,133 872,663 786,700

Travel, in- state 204,373 199,416 206,800

out- of- state 23,293 50,158 25,400

Aid to organizations 1 ,145,529 1,838,516 - 0-

Other operating 2,007,096 2,626,965 2,017,700

Capital o u t lay 216,287 118,707 2,700

Special l i n e items 2,160,000

Continuing a p p r o p r i a t i o n 6,672,838( a)

TOTAL EXPEND l TURES

( a) The " continuing appropriation" category i s f o r carryforward monies previous1 y

appropriated f o r various p l a n n i n g p r o j e c t s , primari 1 y r e l a t e d t o flood c o n t r o l .

Source: Arizona F i n a n c i a l Information Systems and J o i n t L e g i s l a t i v e

Budget Committee Appropriations Report

This audit was conducted i n accordance with generally accepted

governmental auditing standards.

The Auditor General and s t a f f express appreciation to the Director and

s t a f f of the Department of Water Resources for t h e i r cooperation and

assistance throughout the a u d i t .

SUNSET FACTORS

In accordance w i t h Arizona Revised Statutes ( A. R. S.) 941- 2354, the

Legislature should consider the f o l l o w i n g 12 factors i n determining

whether the Department of Water Resources ( DWR) should be continued or

terminated.

1. Objective and purpose i n e s t a b l i s h i n g DWR

The Groundwater Management Act of 1980 establ ished the Department of

Water Resources to focus r e s p o n s i b i l i t y for water management and

reduce groundwater depletion. The act t r a n s f e r r e d to DWR a l l

previous Arizona Water Commission ( AWC) responsi b i l i t i e s and also

established comprehensive groundwater r e g u l a t i o n administered by

DWR. The act c l e a r l y delineates the purpose for DWR's establishment:

I' 1. Focus the responsibi I i t y for water management and

a d m i n i s t r a t i o n of water- related programs w i t h i n t h i s

s t a t e .

2. S t a b i l i z e the use of water resources, p a r t i c u l a r l y

groundwater resources, i n t h i s s t a t e according to

management p r a c t i c e s , procedures, standards and plans

provided for by s t a t u t e .

3. Compile and maintain information which i s necessary for

i n t e l l i g e n t management, a d m i n i s t r a t i o n and planning for

water resources and programs."

2. The effectiveness w i t h which DWR has met i t s o b j e c t i v e and purpose

and the e f f i c i e n c y w i t h which the department has operated

DWR has generally been e f f e c t i v e i n implementing i t s groundwater

management and other r e s p o n s i b i l i t i e s . In regards to groundwater

management, DWR has implemented the groundwater code and developed

f i r s t and second management p Ians. Other important programs

implemented include a s s i s t i n g the court i n the a d j u d i c a t i o n of

surface water r i g h t s , monitoring and ensuring the safety of dams,

water r i g h t s conveyance, groundwater code v i o l a t i o n enforcement,

regulation o f w e l l s and well d r i l l e r s , and other programs. However,

our audit did i d e n t i f y two areas i n which DWR could improve i t s

effectiveness.

e A stronger enforcement program may be needed ( see Finding I I ,

pages 23 through 26).

More e f f o r t i s needed to protect the pub1 i c from hazardous open

we1 Is ( see Finding 1 1 1 , pages 27 through 33).

3. The extent to which the DWR has operated w i t h i n the p u b l i c i n t e r e s t

DWR has operated w i t h i n the public interest by performing a variety

of functions related to the management of both surface and

groundwater resources. DWR has implemented the groundwater code and

related programs requiring groundwater conservation. Other programs

such as ensuring safe dams, flood control, and well regulation, also

benefit the public.

4. The extent to which rules and regulations promulgated by DWR are

consistent with the Legislative mandate

DWR has s u f f i c i e n t a u t h o r i t y to promulgate rules and regulations;

however, not a l l required rules have been promulgated. DWR i s i n the

process of promulgating rules r e l a t i n g t o assured water supply,

inspections and a u d i t s o f groundwater user records, well

construction, and open well resolution. According to DWR, rule

making has been delayed for two reasons. F i r s t , other legal matters

having statutory or court imposed deadlines have had a higher

p r i o r i t y . Second, DWR has taken a cautious approach because of the

s i g n i f i c a n t impact of some of the rules.

5. The extent to which DWR has encouraged input from the public before

promulgating i t s rules and regulations and the extent to which i t has

informed the public as to i t s actions and t h e i r expected impact on

. .. the pub1 i c

DWR uses several methods to inform the pub1 i c of i t s proposed rules

and other a c t i v i t i e s . With proposed rules, DWR uses the s t a t u t o r i l y

required published notice and public hearing. DWR also keeps the

public informed of i t s a c t i v i t i e s through a newsletter, education

programs in schools, workshops, pamphlets, and audiovisual

productions, and by making i t s s t a f f available to representatives of

the news media.

6. The extent t o which DWR has been able to i n v e s t i g a t e and resolve

complaints that are w i t h i n i t s j u r i s d i c t i o n

DWR's a b i l i t y to investigate and resolve complaints has varied

depending upon the amount o f s t a t u t o r y a u t h o r i t y provided. For

groundwater code v i o l a t i o n s , DWR has f u l l a u t h o r i t y and has

established a complete process for complaint r e s o l u t i o n . Also, DWR's

a u t h o r i t y to r e c t i f y dangerous dams i s s u f f i c i e n t . However, DWR does

not have enforcement a u t h o r i t y f o r i l l e g a l uses of surface water or

floodplain management problems. For both of these types of

complaints, DWR only has the a u t h o r i t y t o refer the cases to the

applicable county a t t o r n e y .

7. The extent t o which the Attorney General or any other applicable

agency o f State government has the a u t h o r i t y t o prosecute actions

under enabling l e g i s l a t i o n

A. R. S. $ 45- 104. G authorizes DWR to employ i t s own legal counsel

rather than using Attorney General representation. This i s done

p r i m a r i l y because DWR may be involved i n legal matters w i t h other

State agencies that are represented by the Attorney General. In

addition, DWR's legal counsel represents DWR and the State i n

l i t i g a t i o n concerning a f f a i r s of the department.

DWR's a u t h o r i t y to prosecute actions v a r i e s . The statutes e s t a b l i s h

penalties for groundwater code v i o l a t i o n s , i l l e g a l f i l l i n g of

decorative lakes, operation of dangerous dams, and i l l e g a l recovery

or use of stored water. DWR can impose a c i v i l penalty through a

s t i p u l a t i o n and consent agreement or through a formal hearing

process. Criminal v i o l a t i o n s are referred to the County Attorney o r

the Attorney General. In c o n t r a s t , DWR has no a d m i n i s t r a t i v e

enforcement a u t h o r i t y for v i o l a t i o n s regarding the use or misuse of

surface water. I f DWR cannot persuade the v i o l a t o r to comply, the

case i s referred to the County Attorney or the Attorney General.

( Although untested i n court, DWR argues that i t can also b r i n g a

lawsuit d i r e c t l y to e n j o i n a water user from v i o l a t i n g the surface

water law.) Also, although DWR can delineate f l o o d p l a i n s , the

department lacks enforcement a u t h o r i t y for v i o l a t i o n s of f l o o d p l a i n

requirements. This enforcement a u t h o r i t y belongs to local zoning

a u t h o r i t i e s .

8. The extent t o which DWR has addressed d e f i c i e n c i e s i n the enabling

statutes which prevent it from f u l f i l l i n g i t s s t a t u t o r y mandate

DWR has c o n s i s t e n t l y sought l e g i s l a t i o n r e l a t i n g to i t s enabling

l e g i s l a t i o n over the past several years. For example, DWR has

requested i n t r o d u c t i o n of b i l l s r e l a t i n g to adjudications, dam

safety, f l o o d c o n t r o l assistance, a r t i f i c i a l lakes, groundwater

recharge, and others. In a d d i t i o n , DWR f a c i l i t a t e s an annual

groundwater omnibus b i l l that addresses necessary changes i n the

s t a t u t e s . This b i l l i s developed by an ad hoc group comprised of

members of the water community!')

9. The extent t o which changes are necessary i n the laws of DWR t o

adequately comply w i t h the factors l i s t e d i n the subsection

Based on our audit work we recommend that the L e g i s l a t u r e consider

the following changes to DWR statutes and the groundwater code:

a changing the code's safe- yield and assured water supply

provisions and provid i ng for comprehensive water management ( see

Finding I , pages 13 through 21);

a r e q u i r i n g open well information to be reported on a l l conveyance

reports ( see Finding 1 1 1 , pages 27 through 33);

a amending A. R. S. $ 45- 611.1 to allow an increase i n the

groundwater withdrawal fee ( see Finding IV, pages 35 through

36) ; and

a amending the statutes to a l l o w f o r a d d i t i o n a l assessments of

water r i g h t s claimants so that more of the costs of the

adjudications process are borne by those that are p r i m a r i l y

benef i t i ng from i t ( see Finding V , pages 37 through 43).

DWR has i d e n t i f i e d two areas for s t a t u t o r y change. DWR c u r r e n t l y

lacks a d m i n i s t r a t i v e enforcement a u t h o r i t y over surface water

v i o l a t i o n s and i s l i m i t e d t o r e f e r r i n g v i o l a t o r s t o e i t h e r the

Attorney General or the County Attorney. I n a d d i t i o n , the statutes

( ' 1 Water community i s a term used t o describe e n t i t i e s involved i n water p r o v i s i o n ,

use, r e g u l a t i o n , and pol i c y development.

do not address the r e g u l a t i o n of e f f l u e n t ( wastewater product from a

municipal sewage treatment plant that can be used i n l i e u of potable

water for some a p p l i c a t i o n s ) .

10. The extent t o which the termination o f DWR would s i g n i f i c a n t l y harm

the p u b l i c health, safety or welfare

Terminating DWR could cause s i g n i f i c a n t harm to the p u b l i c ' s health,

s a f e t y , and welfare. DWR was establ ished because of the recognition

that without focused management of water- related programs, the

general economy and welfare of the State and i t s c i t i z e n s would

s u f f e r . DWR i s charged w i t h the r e s p o n s i b i l i t y of ensuring that i n

the long- term, s u f f i c i e n t water i s avai l a b l e f o r use without f u r t h e r

d e p l e t i o n o f groundwater supplies i n the Phoenix, Tucson, and

Prescot t active management areas. For the Pi na l act i ve management

area, DWR must ensure that s u f f i c i e n t groundwater i s maintained for

future n o n i r r i g a t i o n uses. DWR plans to achieve these goals through

management plans r e q u i r i n g conservation and development of a d d i t i o n a l

water resources.

DWR also plays a c r i t i c a l r o l e i n terms of p u b l i c safety and health.

DWR i s responsible for helping to ensure that many of the dams i n the

State are safe. In a d d i t i o n , DWR regulates well construction. Open

wells can be both a safety and health hazard. Not only can people

fa1 I i n t o open we1 I s , but open we1 I s are a l s o a d i r e c t conduit for

p o l l u t i o n to reach aquifers used f o r d r i n k i n g water. DWR shares

responsibi I i t y w i t h the Department of Environmental Qua1 i t y ( DEQ)

regarding water q u a l i t y . Although DEQ has primary water q u a l i t y

r e s p o n s i b i l i t y , DWR provides technical data and analyses. DWR i s

required by s t a t u t e t o assess groundwater qua1 i t y i n the AMAs and to

develop groundwater q u a l i t y p r o t e c t i o n programs. DWR along w i t h DEQ

implements r e s o l u t i o n of Superfund s i t e s ( hazardous waste and

groundwater p o l l u t i o n s i t e s ) i n Arizona.

11. The extent to which the level of regulation exercised by DWR i s

appropriate and whether less or more stringent levels of regulation . . would be appropriate

DWR's only l i c e n s i n g function i s the licensing of well d r i l l e r s . The

level of r e g u l a t i o n i s appropriate regarding l i c e n s i n g o f well

dr i l l e r s .

12. The extent to which Dm has used private contractors i n the

performance of i t s duties and how effective use of private

contractors cou l d be accomp l i shed

DWR contracts f o r a v a r i e t y o f services from the p r i v a t e sector. For

example, DWR contracts for hearing o f f i c e r s , e l e c t r o n i c data

processing ( EDP) services, var i ous technical studies and analyses,

flood c o n t r o l c o n s t r u c t i o n and maintenance, legal counsel,

audiovisual productions, and other services. DWR s t a t e s t h a t p r i v a t e

sector services are most c o s t - e f f e c t i v e for short- term p r o j e c t s and

for when DWR lacks the necessary e x p e r t i s e .

FINDING I

TO HELP ENSURE MORE EFFECTIVE WATER MANAGEMENT, THE LEGISLATURE SHOULD

ADDRESS SEVERAL PROBLEMS THAT HAVE SURFACED SINCE

THE GROUNDWATER CODE'S INCEPTION IN 1980

The Legislature should consider addressing problems that have developed

since the groundwater code was enacted. Although the groundwater code

r e f l e c t s Arizona's need for strong water r e g u l a t i o n and has resulted i n

better water management, several key provisions of the code may a c t u a l l y

work against i t s goal. The L e g i s l a t u r e should consider addressing these

code d e f i c i e n c i e s and other water management issues. In doing so, the

Legislature may wish to create a study commission.

Statutes Include Groundwater Code

in Sunset Review

A. R. S. 541- 2374.15 includes the groundwater code as a p a r t o f the sunset

review of the Department of Water Resources ( DWR). The code along w i t h

DWR i s scheduled for termination on July 1, 1990, and i t s enabling

statutes are automatically repealed on January 1, 1991, unless continued

by the Legislature. A review of the agency's enabling l e g i s l a t i o n ,

including the groundwater code, i s a part of the sunset review process.

A. R. S. 941- 2354 requires the l e g i s l a t i v e committee of reference to

consider the extent to which changes are necessary i n the laws of the

agency.

Groundwater Code I s Needed and Has

Provided Better Water Management

The groundwater code i s needed because i t has provided b e t t e r water

management i n Arizona. E f f i c i e n t water use i s a basic tenet for

communities, industry, and a g r i c u l t u r e coexisting i n a desert

environment. Recognizing t h i s , i n 1980 the L e g i s l a t u r e adopted the

Groundwater Management Act. The act established DWR to implement i t s

provisions and provide for general water management i n the State. The

code's provisions include strong conservation and other measures to be

implemented for the purpose of attempting to achieve safe- yield

groundwater use by the year 2025.

The code's implementation over the l a s t nine years has resulted i n

generally b e t t e r water management. The code's conservation requirements

have been a factor i n reducing the amount of groundwater used. For

example, i n the Phoenix area groundwater pumping has been reduced from

1,365,000 acre- feet i n 1980 to an estimated 870,000 acre- feet i n 1988.

DWR has recently developed a new series of management plans that require

even less groundwater use.

Several Code Provisions May Not

Provide for E f f e c t i v e Water Management

Several of the key provisions i n the groundwater code have not i n some

instances provided for e f f e c t i v e water management. The code's safe- yield

provisions probably w i l l not be a t t a i n e d and may not be necessary. The

code's assured water supply provision may, i n p r a c t i c e , a c t u a l l y work

against the goal of safe- yield. The municipal conservation measure

requi red by the code may not i n a1 l cases accurately r e f l e c t groundwater

use reduction and may i n practice be applied improperly.

Several problems w i t h the code's s a f e - y i e l d p r o v i s i o n s - The safe- yield

goal of 2025 may not be a r e a l i s t i c and appropriate basis for planning.

F i r s t , i t i s u n l i k e l y that the goal can be met i n e i t h e r Phoenix or

Tucson. Second, achieving the goal by 2025 may not be necessary.

Safe- yield may not be achieved i n the Phoenix and Tucson active

management areas. According to DWR's Second Management P l a n , b o t h the

Phoenix and Tucson AMAs w i l l f a l l short of achieving safe- yield even w i t h

the implementation of Second Management Plan requ i rements. Depending

upon the category of the user ( municipal, a g r i c u l t u r a l , e t c . ) ,

implementation of the F i r s t and Second Management Plans w i l l only produce

from 6 to 31 percent of the t o t a l reductions needed to achieve

safe- yield, according to DWR's deputy d i r e c t o r for water management.

Those f i gures are s i gn i f i cant because the Second Management P l an i nc l udes

accounting for full use of the Central Arizona Project ( CAP) water, the

largest new non- groundwater supply, and requires maximum conservation

from a g r i c u l t u r e , the primary groundwater user i n the Phoenix AMA. The

Second Management Plan s t a t e t h a t s a f e - y i e l d w i l l not be achieved without

further conservation and augmentation e f f o r t s ! ' )

However, the p o t e n t i a l for f u r t h e r conservation i s l i m i t e d . Although DWR

can impose conservation requirements, i t cannot stop r i g h t s holders from

pumping groundwater. The code has established several types of

groundwater pumping r i g h t s which e s s e n t i a l l y " grandfathered" i n a l l

e n t i t i e s l e g a l l y using groundwater p r i o r to the Groundwater Management

Act. The t o t a l amount of groundwater associated w i t h these r i g h t s i s

s i g n i f i c a n t , well over one m i l l i o n acre- feet for the Phoenix AMA and over

300,000 acre- feet for the Tucson AMA.

The p o t e n t i a l for s i g n i f i c a n t augmentation also appears to be l i m i t e d

under e x i s t i n g code p r o v i s i o n s . For s a f e - y i e l d to occur, other

non- groundwater supplies must be developed and used i n l i e u of

groundwater, or groundwater r i g h t s must be purchased and r e t i r e d . The

code provides DWR a u t h o r i t y to c o l l e c t fees for the purposes of

augmentation and for the purchasing and retirement of groundwater

r i g h t s . I n e i t h e r case, fee amounts t h a t could be c o l l e c t e d may f a l l

well short of any amounts needed.

F i n a l l y , achieving safe- yield by 2025 may not be necessary h y d r o l o g i c a l l y

because of the large amounts of groundwater i n storage beneath the

Phoenix and Tucson AMAs. According to DWR, the Phoenix AMA has

approximately 160 m i l l i o n acre- feet of groundwater i n storage, whereas

Tucson has approximately 71 m i l l ion acre- feet. According to experts i n

the water community, there i s enough water for several hundred years for

the Phoenix AMA and for 700 years for Tucson. Further, according to DWR,

pumping has decl ined. Much less groundwater was pumped i n 1988 as

compared to 1980 i n both the Phoenix and Tucson areas.

Assured water supply provisions can work a g a i n s t s a f e - y i e l d - The

code's assured water supply provisions can, i n p r a c t i c e , work against the

( 1 ) " Augmentation" here means to supplement a water supply.

code's goal of safe- yield. Before they can develop an area, the code

requi res that developers demonst rate an assured water supply ( s u f f i c i e n t

water of adequate qua1 i t y continuously avai lable to s a t i s f y needs) of at

least 100 years. The code, however, a1 lows both groundwater and surface

water to be used to demonstrate an assured supply. This s t a t u t o r y

language has, i n practice, allowed for a very l i b e r a l p o l i c y of issuing

permits seemingly i n a manner not consistent w i t h the AMA management goal

of safe y i e l d . By allowing groundwater to be used, the code f u r t h e r

increases the number of groundwater r i g h t s and the p o t e n t i a l amount of

groundwater pumped. As of e a r l y 1989, nearly 190,000 acre- feet of

groundwater has e i t h e r been granted, applied f o r , or projected i n the

AMAs, mainly i n the Phoenix area. This works against the code's

safe- yield goal i f the land being developed did not have previous

a g r i c u l t u r e water r i g h t s because an even greater amount of groundwater

w i l I have to be replaced through f u r t h e r conservation and augmentation

e f f o r t s by other users.

Currently, the use of groundwater for assured supplies i s determined by

DWR based on guidelines established i n 1973 which take i n t o account the

impact on the level of the water t a b l e . However, DWR believes that

through the rulemaking process the groundwater code and the assured

supply provisions can be i n t e r p r e t e d j o i n t l y to require a l l new assured

supplies to be consistent w i t h the goal of safe- yield. DWR i s c u r r e n t l y

developing rules which w i l l phase i n a reduction i n the use of

groundwater for assured supplies. These r u l e s may allow the department

to address the assured water supply problem a d m i n i s t r a t i v e l y .

Problems with code's municipal conservation measure - The code's

measure of municipal conservation may not accurately r e f l e c t groundwater

use reduction and may i n practice be appl ied improperly. The code and

DWR management plans require " reasonable reductions i n per c a p i t a use" as

part of the municipal water provider conservation program. Per capita

use, however, has two problems. F i r s t , i t may not be a true i n d i c a t i o n

of e f f i c i e n t groundwater use and may not work i n concert w i t h the code's

safe- yield goal. A c i t y can reduce i t s reliance on groundwater and s t i l l

be out of compliance w i t h per capita use requirements because DWR also

includes surface water i n the c a l c u l a t i o n . For example, one c i t y has

reduced i t s reliance on groundwater from 99 per cent of t o t a l supply down

to 40 percent since 1980 by using CAP water instead of groundwater.

However, that c i t y i s c u r r e n t l y over i t s per c a p i t a use rate according to

DWR and may be subject to f i n e s o r other enforcement a c t i o n s .

Second, DWR may have improperly applied the per c a p i t a use measure of the

groundwater code. Per c a p i t a computations have included both surface

water and groundwater components of a c i t y ' s water use and are subject to

mandatory plan requirements. According to l e g i s l a t i v e Council only the

groundwater components of a c i t y ' s water use are s u b j e c t t o mandatory

plan requirements ( see Appendix). However, DWR maintains i t must

consider surface water use to be able to properly i n t e r p r e t whether the

statutory c r i t e r i a of " reasonable reductions'' i s met. DWR notes that

surface water supplies are more v a r i a b l e than groundwater which could

cause a greater or lesser use of groundwater depending on conditions.

Accordingly, DWR has adopted a p o l i c y of including surface water i n the

per capita use c a l c u l a t i o n s to determine when a c i t y i s over i t s per

capita goal. I f a c i t y i s over i t s goal, DWR then bases i t s enforcement

action on the amount of groundwater used.'" However, DWR's

i n t e r p r e t a t i o n of the statutes regarding t h i s issue i s arguably subject

to challenae and has not y e t been tested i n court.

Problems w i t h Code and Other Water

Management l ssues Need t o Be Rev i ewed

Now may be an appropriate time for the L e g i s l a t u r e to address problems

with the groundwater code. In doing so, the L e g i s l a t u r e may wish to

create a study commission.

Many w i t h i n the water community indicated that i t would be appropriate to

begin a review o f the code and other water issues. They stated four

reasons. F i r s t , a c t i o n should be taken before any p o t e n t i a l a d d i t i o n a l

time, money, and water i s l o s t . The Second Management Plan marks the

( 1 ) To illustrate how this works, DWR gives the following example: If a city has a

goal of 200 gallons per capita per day ( gpcd), and actual usage of 400 gpcd, OWR

would look at the surface and groundwater usage. If the city used 350 gpcd of

surface water and 50 gpcd of groundwater, DWR would take enforcement action based

on the 50 gpcd.

beginning of a number o f s i g n i f i c a n t expenses which w i l l have to be met

to comply w i t h the code. For example, the c i t y of Phoenix estimates i t

w i l l spend nearly $ 515 mi l l ion over the next 50 years to address the code

and other water requirements. Second, the discussion should occur before

any a d d i t i o n a l controversies surface, such as the water t r a n s f e r issue.

The water transfer issue, which involves the moving of r u r a l Arizona

groundwater to the metropolitan areas, i s a d i r e c t r e s u l t of current code

provisions. Third, because of the nonseverability clause i n the code ( i f

a p o r t i o n of the code i s challenged and struck down i n court, the e n t i r e

code i s struck because the code i s intended to be nonseverable), problems

should be addressed before they are chal lenged i n c o u r t , and the e n t i re

code i s l o s t . F i n a l l y , problems and issues should be addressed now so

they can be addressed comprehensively rather than on a piecemeal basis.

There may be a d d i t i o n a l issues that need a t t e n t i o n that e i t h e r were not

i d e n t i f i e d o r t h a t we d i d not have time to develop. ( ' I However, based

on our analysis, at least the f o l l o w i n g code problems and issues should

be reviewed.

a More reasonable approach t o safe- yield may be needed - C u r r e n t l y ,

a l t h o u ~ ht he code reaui res safe- yield, i t does not ~ r o v i d et he tools

to ach- ieve i t . i4any'people i n - t h e water community recognize that

safe- yield probably w i l l not be achieved by the year 2025. However,

i n response to the code, c i t i e s have begun to purchase water farms

outside of AMAs f o r the purpose of supplementing t h e i r supply. These

types of actions taken to achieve safe- yield can be c o n t r o v e r s i a l ,

are expensive, and may not be necessary because of the large amount

of groundwater i n storage i n both the Phoenix and Tucson AMAs. The

safe- yield goal should be reviewed to determine i f i t i s a c t u a l l y

needed, needed by 2025 or l a t e r , or i f a slow depletion of the

aquifer i s acceptable.

a Assured water supply provisions should be reviewed - The assured

water provisions may need to be modified to work i n concert w i t h the

~ a f e - ~ ' i e l gdo al. AS discussed p r e v i o u s l y , the assured water supply

requirement works against the safe- yield goal by e s t a b l i s h i n g

a d d i t i o n a l groundwater pumping r i g h t s that have to be made up w i t h

a d d i t i o n a l conservation and augmentation e f f o r t s . I f safe- yield i s

retained as a goal, the current assured water supply p r o v i s i o n may

need to be r e s t r i c t e d .

( ' 1 Two other issues t h a t we d i d not have time t o develop include p o t e n t i a l problems

w i t h the a g r i c u l t u r e conservation requirement found i n the Second Management Plan

and the possi bi 1 i t y o f 1 imi ti ng growth because of the 1 ack of new water suppl i es.

r The code's municipal conservation measure should be reviewed - The

code's measure of municipal water use and conservation ( gallons per

capita per day) should be reviewed. The goal may not r e f l e c t

m u n i c i p a l i t i e s ' e f f o r t s to lessen dependence on groundwater because,

as noted e a r l i e r , i t includes both surface and groundwater. I f the

primary purpose o f the code i s to reduce groundwater use and reach

safe- yield, the measure may ~ e e dto be changed to r e f l e c t groundwater

used.

r The need f o r more comprehensive water management should be reviewed

Currently, the s t a t u t e s l i m i t comprehensive water r e g u l a t i o n to

groundwater. Therefore, according to the Arizona L e g i s l a t i v e

Council, only groundwater i s regulated by DWR management plans.

Surface water i s a major component i n Arizona's water supply.

E f f l u e n t was recently declared by the Arizona Supreme Court to be a

t h i r d type of water, not under r e g u l a t i o n by the code. E f f e c t i v e

management of Arizona's l i m i ted water resources may requi r e t h a t a l l

water types be subject to planning and conservation requirements so

that the t o t a l resource i s used most e f f e c t i v e l y .

Statewide water planning and management may also be needed. The code

focuses on water management i n the AMAs. However, areas outside of

the AMAs also have water management challenges, as witnessed by the

recent water t r a n s f e r issue. In a d d i t i o n , the large amount of

Colorado River water allocated to western Arizona, 1.3 m i l l i o n

acre- feet, has been viewed by some o f f i c i a l s as a possible

augmentation source f o r c e n t r a l Arizona. Statewide planning and

management may be needed to help ensure that water i s allocated

wisely and f a i r l y .

r Incentives f o r non- groundwater use and increased water marketing

f l e- x i - b i l i t v should be examined - Two related issues. incentive. s. fo- r

non- groundwater use and increased water marketing f l e x i b i l i t y , should

be examined. According to water o f f i c i a l s at a l l l e v e l s , there are

no incentives f o r m u n i c i p a l i t i e s or other e n t i t i e s to use other water

or to recharge ( pumping water back i n t o the aquifer for future use)

surplus water. Instead, i t i s much less expensive to pump

groundwater. For example, much of Arizona's CAP a l l o c a t i o n i s not

being used because of the l i m i t e d incentives to e i t h e r use or

recharge the water. According to DWR, unused CAP water goes to

C a l i f o r n i a or down the r i v e r to Mexico. This involves p o t e n t i a l l y

mi l l ions of acre- feet of water.

Increased water marketing f l e x i b i l i t y ( less r e s t r i c t i v e b a r r i e r s to

water transfer or sale) may be needed to help ensure that water i s

available and used most e f f i c i e n t l y and e f f e c t i v e l y . Marketing water

from the CAP and Arizona r i v e r s i s l i m i t e d because o f the federal

Colorado River law and State surface water law. The State has to

work w i t h the federal government for any changes i n Colorado River

management. However, the Department of I n t e r i o r has recently

acknowledged the need for water marketing.

r Provisions f o r metropolitan water d i s t r i c t s could enhance water

management i n large urban areas - Including provisions i n the code

for the establishment of metropolitan water d i s t r i c t s could enhance

water management i n large urban areas. Currently, the Phoenix AMA

has many m u n i c i p a l i t i e s and other water using e n t i t i e s separately

addressing water supply , conservat ion, and augmentat ion chal lenges.

Some i n the water community have indicated that competition for

l i m i t e d supplies has been and w i l l be a c o s t l y p r o p o s i t i o n . Smaller

communities do not have the resources to acquire a d d i t i o n a l

supplies. Several water o f f i c i a l s i d e n t i f i e d b e n e f i t s that may

r e s u l t from the establishment of a municipal water d i s t r i c t including

a united e f f o r t for securing a d d i t i o n a l supplies; less cost due to

more e f f i c i e n t a c q u i s i t i o n , t r a n s f e r , and treatment costs; and a

val leywide uniform conservation requirement. I f t h i s concept i s

considered, the current DWR and i t s AMA r e s p o n s i b i l i t i e s and

s t r u c t u r e may need to be reexamined.

Legislature may wish t o create study comnission - The Legislature may

wish to create a study commission to review p o t e n t i a l problems w i t h the

code and other water management issues. A precedent for t h i s was the

establishment of the Groundwater Study Commission by the Legislature i n

1977 to develop the groundwater code. The primary b e n e f i t o f a study

commission would be t h a t , i f s t r u c t u r e d p r o p e r l y , i t would b r i n g together

the various i n t e r e s t s w i t h i n the water community to resolve the problems

and issues. H i s t o r i c a l l y , water p o l i c y development has been most

successful when consensus was forged w i t h i n the water community. Another

benefit of a study commission i s that i t could be given a l i m i t e d ,

focused mission of addressing s p e c i f i c issues rather than the e n t i r e code.

RECOWENDATION

The L e g i s l a t u r e should consider e s t a b l i s h i n g a study commission to

address the f o l l o w i n g groundwater code problems and other water

management issues including whether:

a. changes are needed i n the safe- yield, assured water supply, and

the municipal conservation measure provisions of the code;

b. the State needs 1) more comprehensive water management including

r e g u l a t i o n of surface water and e f f l u e n t , and 2) a statewide

approach to water planning and management;

c. the code should provide incentives for using water other than

groundwater;

d. the code should increase the a b i l i t y of water r i g h t s holders to

market water; and

e. the code should allow for the establishment of municipal water

d i s t r i c t s to manage water supplies and usage i n metropolitan

areas.

FINDING I I

A STRONGER ENFORCEMENT PROGRAM MAY BE NEEDED

A more e f f e c t i v e enforcement program may be needed. DWR's review of

annual groundwater withdrawal reports and other independent analyses

indicates that noncompliance w i t h management plan requirements could be

s i g n i f i c a n t . Moreover, t h i s noncompliance may increase i n the f u t u r e as

conservation requirements become more s t r i n g e n t .

Enforcement o f Conservation Plans I s

C r i t i c a l f o r Successful Water Management

E f f e c t i v e implementation of DWR's water management plans would be

severely hampered without adequate provisions for enforcement. To

determine i f conservation goals are a c t u a l l y being achieved, DWR must be

able to monitor groundwater usage and enforce compliance w i t h plan

requi rements.

Recognizing t h i s need, the framers of the Groundwater Management Act

included provisions designed to ensure user compliance. Most water r i g h t

holders are required to " maintain current accurate records of . . .

withdrawals, transportation, d e l i v e r i e s , and use of groundwater," and to

report t h i s information annual l y to DWR.") Over 11,000 water r i g h t s

holders are expected to f i le reports w i t h the department for 1988.

Moreover, the agency can conduct any inspections, i n v e s t i g a t i o n s , o r

audits i t deems necessary to ascertain compliance w i t h s t a t u t o r y

requirements. I f v i o l a t i o n s occur, DWR can conduct a d m i n i s t r a t i v e

hearings, issue cease and d e s i s t orders, assess c i v i l penalties of up to

$ 10,000 per day, and/ or seek i n j u n c t i v e r e l i e f .

A. R. S. 545- 632. C provides t h a t persons who withdraw groundwater from some wells,

and many noni rri gation customers of c i t i e s , towns, p r i v a t e water companies, and

i r r i g a t i o n d i s t r i c t s are exempt from t h i s requirement.

Numerous V i o l at ions Have

Been I d e n t i f i e d

DWR's review of annual withdrawal reports has i d e n t i f i e d many p o t e n t i a l

v i o l a t o r s of plan requirements. Other DWR analyses also i n d i c a t e that

noncompliance may be s i g n i f i c a n t enough to warrant concern and f u r t h e r

study.

DWR i d e n t i f i e d many p o t e n t i a l v i o l a t o r s by reviewing annual withdrawal

reports f i l e d for the 1987 r e p o r t i n g period. For example, s t a f f i n the

Phoenix AMA, who monitor the S t a t e ' s largest r e p o r t i n g area, i d e n t i f i e d

over 900 p o t e n t i a l v i o l a t o r s through an i n i t i a l review of annual

reports. More extensive f i l e reviews were conducted for 579 r i g h t

holders. As a r e s u l t of these reviews, 397 f i l e r s were chosen for

a u d i t s . ( 1 )

However, reviewing annual reports can only detect instances of

noncompliance i f f i l e r s , i n e f f e c t , " v o l u n t a r i l y confess1' to overuse of

groundwater. F i l e r s are not required to submit supporting documentation

w i t h t h e i r reports. I f f a l s e o r erroneous data i s c a l c u l a t e d o r used on

an annual report, a f i le review o r exception report w i l l not detect a

problem. Although a u d i t s can uncover inaccurate r e p o r t i n g , they are

generally conducted only i f a report review reveals a problem. According

to the deputy d i r e c t o r of water management, DWR can only conduct a

l i m i t e d number of random a u d i t s o r on- site inspections due to

i n s u f f i c i e n t s t a f f . Further, although power records would be useful i n

v e r i f y i n g reported information, power companies have not made the records

avai lable to DWR.")

Analyses by DWR's basic data section have found that underreporting i s

not always detected by reviewing annual f i l i n g s . The analyses also

provide f u r t h e r evidence of noncompliance with groundwater management

( 1 ) Potential v i o l a t o r s i d e n t i f i e d and i n v e s t i g a t e d by DWR included a l l types of water

users such as c i t i e s and towns, i r r i g a t i o n d i s t r i c t s , p r i v a t e providers, and t u r f

f a c i l i t i e s ( e. g., go1 f courses).

( 2) Power records can be used t o help c a l c u l a t e approximations of the amount of water

t h a t has been pumped.

plan requirements. A recent study conducted by the department on a

sample of users i n the Eloy sub- basin of the Pinal AMA revealed t h a t :

I' . . . there are undoubtedly many bona f ide cases of

unintentional and i n t e n t i o n a l underreporting.

On the basis of t h i s i n v e s t i g a t i o n , withdrawals were

underreported by owners for 1985 by approximately 7.9 percent

( i n the area evaluated). This figure i s s i m i l a r to the 7 percent

underreporting f i g u r e computed for 99 wells i n the Hassayampa

sub- basin i n the Phoenix AMA."

The report concluded that the agency could i d e n t i f y " more than a t h i r d "

of the State's p r i v a t e i r r i g a t i o n wells as p o t e n t i a l v i o l a t o r s . Since

the analysis r e l i e d on some estimated data, agency o f f i c i a l s stressed

that these r e s u l t s are not conclusive. Differences i n pump e f f i c i e n c i e s ,

pump I i f t s , and discharge pressures can also a f f e c t the r e s u l t s .

However, the r e s u l t s of the study are s i g n i f i c a n t enough to warrant

f u r t h e r study and concern by DWR.

Limited Enforcement C a p a b i l i t y and More

Stringent Requirements May Be a Formula

f o r Future Noncompliance

Weaknesses i n current procedures for detecting noncompliance combined

w i t h more s t r i n g e n t conservation requirements may create both the

opportunity the incentive for future noncompliance. DWR w i l I need to

study the extent of noncompliance and underreporting, and determine

whether a d d i t i o n a l s t a f f and stronger enforcement e f f o r t s are needed.

More s t r i n g e n t conservation plans could increase users' incentive to

underreport unless c u r r e n t d e t e c t i o n methods are strengthened.

Conservation requirements under the F i r s t Management Plan are r e l a t i v e l y

l e n i e n t . The Second Management Plan, however, which w i l l be implemented

i n 1990, i s more s t r i c t . The second plan w i l l require a s i g n i f i c a n t

monetary investment on the p a r t of water users, and perhaps economic and

other hardships, to comply w i t h i t s conservation provisions. Those not

wishing to make the necessary investment or changes i n water usage may be

tempted to avoid complying by misrepresenting water consumption i n t h e i r

annual reports.

Consequently, the department needs to continue to assess the accuracy of

water users' r e p o r t i n g and the impact i t has on the S t a t e ' s conservation

goals. Although the analysis conducted to date has been very valuable,

more work i s needed. As noted e a r l i e r , estimated data used i n previous

research requires t h a t r e s u l t s and conclusions be q u a l i f i e d . Determining

the extent and impact of inaccurate r e p o r t i n g , however, may require

a d d i t i o n a l s t a f f i n g .

I f f u r t h e r a n a l y s i s determines that inaccurate r e p o r t i n g i s a serious

t h r e a t t o achieving the current safe- yield goal, then DWR should consider

strengthening i t s enforcement e f f o r t . I n s t i t u t i n g a system of more

frequent random a u d i t s and o n - s i t e inspections are two a l t e r n a t i v e s . DWR

could also require f i l e r s to provide documentation supporting power usage

information contained i n t h e i r f i l i n g s . F i n a l l y , DWR w i l l need to

determine what a d d i t i o n a l s t a f f i n g and resources would be needed to

implement t h i s enhanced enforcement program.

1. The department should determine the impact underreporting has on the

State's conservation goals. I f necessary, the agency should request

additional s t a f f i n g from the L e g i s l a t u r e to perform the required

analysis.

2. I f DWR determines that inaccurate r e p o r t i n g i s a serious threat to

safe- yield, DWR should take steps to strengthen i t s enforcement

e f f o r t . Possible a l t e r n a t i v e s include: a) i n s t i t u t i n g a system for

conducting random audits of water users, b) increasing the number of

o n - s i t e inspections, and c) r e q u i r i n g f i l e r s to provide supporting

documentation f o r power usage data contained i n reports.

FINDING Ill

MORE EFFORT IS NEEDED TO PROTECT THE PUBLIC

FROM HAZARDOUS OPEN WELLS

In October 1988, an elementary school teacher from the town of Maricopa

reported a hazardous well near her school. The well was three feet i n

diameter, 600 feet to water, and unobstructed ( nothing to break the

600- foot f a l l ) . School c h i l d r e n were playing by the w e l l , dropping rocks

into i t . This well i s j u s t one of what DWR estimates could be hundreds

of hazardous open wells i n the State. Because these wells present a

s i g n i f i c a n t health and safety threat to the p u b l i c , more e f f o r t i s needed

to address t h i s hazard. The L e g i s l a t u r e should consider several ways to

fund the s t a f f i n g needed for t h i s e f f o r t .

DWR was given open well enforcement r e s p o n s i b i l i t i e s i n 1986. A. R. S.

545- 594 gives the d i r e c t o r o f DWR the r e s p o n s i b i l i t y to determine whether

an open well i s dangerous to property or t o p u b l i c health or s a f e t y . The

d i r e c t o r has the a u t h o r i t y to require the well to be capped. During the

course of the a u d i t , the department adopted emergency rules enabling the

d i r e c t o r t o exercise t h i s a u t h o r i t y .

Large Numbers of Open Wel I s

Present a S i g n i f i c a n t Health and Safety Hazard

Public health and safety are threatened i n Arizona by the presence of

thousands of open w e l l s . DWR has documented approximately 700 open wells

i n active management areas and other regions of the State. Many o f these

wells are hazardous because they are located close to inhabited areas. I n

a d d i t i o n , these wells provide a d i r e c t route for f e r t i l i z e r , p e s t i c i d e s ,

and other p o l l u t a n t s t o enter the a q u i f e r .

Hundreds o f open wells found - Hundreds of open wells have been

i d e n t i f i e d but remain uncapped i n Arizona. DWR d i r e c t e d i t s f i e l d s t a f f

to record a l l open we1 I s found i n the Pinal AMA during the course of

performing other d u t i e s . During a two- week period i n November 1988, 488

open wells were documented. Forty- eight of these wells are categorized

as " high hazard" i n d i c a t i n g that they present a threat to the p u b l i c .

Subsequently, DWR found 100 open wells i n the Phoenix AMA during a

two- day period. DWR also found 52 wells i n Harquahala and B u t l e r Valley.

DWR estimates that thousands more open we l I s have yet to be discovered.

The Pi nal AMA may have approx imate l y 500 add i t i onal uncapped we l l s, and

the Phoenix AMA may have hundreds more. In a d d i t i o n , DWR estimates that

there are hundreds of open we1 I s i n the Tucson and Prescott AMAs, where

there have been no e f f o r t s to discover them, and i n the southeast section

of the State near Safford and San Simon.

Open wells threaten p u b l i c safety - Many open wells are hazardous

because they have openings large enough f o r c h i l d r e n to enter and are

located near inhabited areas. For example, DWR s t a f f found:

a An open well w i t h a 20- inch diameter along a road i n the Pinal AMA.

An occupied home was located across the road 50 yards away.

0 A well with a 14- inch diameter located on r e s i d e n t i a l property where

a small c h i l d l i v e d . A rusty o i l drum was covering the hole.

a An open well of unknown size covered only by a mattress spring.

0 Another open we1 l located between two bushes. This we1 l was 30 feet

away from a residence.

Even wells small i n diameter can be dangerous. In a w e l l - p u b l i c i z e d

Texas case, Jessica McClure f e l l down a well only 8 inches i n diameter.

Forty- eight of the wells found i n the Pinal AMA are at least 8 inches i n

diameter and are located w i t h i n 300 feet of inhabited areas. These wells

present a c l e a r t h r e a t to the community.

Groundwater can be p o l l u t e d - Further, open wells threaten p u b l i c

health because these w e l l s provide a d i r e c t conduit through which

p o l l u t a n t s may enter a q u i f e r s . In a g r i c u l t u r a l areas, p e s t i c i d e s ,

herbicides, and f e r t i l i z e r s can enter aquifers through open wells located

on or near farmland. In l i m i t e d t e s t i n g since 1979, the Department of

Health Services ( DHS) and l a t e r , the Department of Environmental Quality

( DEQ), have found p e s t i c i d e contamination i n groundwater. Unhealthful

concentrations of DBCP and EDB ( two a c t i v e ingredients i n p e s t i c i d e s )

have been discovered i n Yuma, the East Salt River Val ley, and the West

Salt River Valley. While there i s no evidence to date that t h i s

contamination occurred due to open w e l l s , DEQ o f f i c i a l s recognize the

r i s k s these wells present for s w i f t contamination of groundwater.

F e r t i l i z e r s and other contaminants may also enter the aquifers through

open wells. The Arizona State Chemist estimates that approximately

300,000 tons of a g r i c u l t u r a l f e r t i l i z e r s are used i n the State every

year. Even i n urban areas, v a r i o u s r u n o f f p o l l u t a n t s may enter the

aquifer by way of open we1 I s .

More E f f o r t I s Needed t o

Address Open Well Hazards

More can be done to address the problem of open w e l l s . Due t o l i m i t e d

s t a f f and other p r i o r i t i e s , DWR does not have an organized program for

discovering open w e l l s . Once w e l l s are discovered, i n v e s t i g a t i o n and

follow- up need to be more comprehensive and timely.

Discovery - DWR does not c u r r e n t l y have an organized program for

discovering open w e l l s . Several d i v i s i o n s of the department s p o r a d i c a l l y

f i n d and report open we1 Is during the course of performing other d u t i e s .

As a r e s u l t , discovery i s haphazard and l i m i t e d to areas where DWR i s i n

the f i e l d for other reasons. A more comprehensive and systematic e f f o r t

to f i n d open wells would require assigning s t a f f s p e c i f i c a l l y to t h i s

e f f o r t and organizing a broader sweep of areas to be observed.

DWR also could use other innovative methods to discover open w e l l s . For

example, conveyance of water r i g h t s reports are a p o t e n t i a l source of

open w e l l i n f o r m a t i o n . DWR already requires that a l l land t r a n s f e r s

involving water r i g h t s be reported to the department. DWR could require

that open wells be i d e n t i f i e d , capped, and reported to DWR on the

e x i s t i n g report before the land t r a n s f e r can take place. This technique

i s used i n Iowa to i d e n t i f y open w e l l s . According to o f f i c i a l s there,

land owners discover t h e i r own open wells while preparing t h e i r

conveyance reports.

DWR's well r e g i s t r y i s also a p o t e n t i a l l y useful discovery t o o l . A l l

well owners must r e g i s t e r t h e i r wells w i t h DWR. Approximately 77,000

we1 I s are on record presently with the department. The r e g i s t r y has

never been used to help i d e n t i f y wells which are no longer i n use and

need to be capped.

lnvestigation and follow- up - More also needs to be done to i n v e s t i g a t e

and follow up on p o t e n t i a l l y hazardous w e l l s t h a t have been discovered.

Due to l i m i t e d s t a f f and competing planning and enforcement p r i o r i t i e s ,

follow- up has been l i m i t e d .

l n v e s t i g a t i o n of an open w e l l involves f i n d i n g the owner of the w e l l and

ensuring that i t i s properly capped. Determining ownership may require

researching records at the county assessor's o f f i c e . I n a d d i t i o n , s t a f f

may need to v i s i t the well s i t e to determine what must be done to

properly and safely cap or abandon the we1 I .

C u r r e n t l y , o n l y h i g h hazard open wells are given a t t e n t i o n by DWR and the

AMAs: other p o t e n t i a l l y hazardous ones are n o t b e i n g addressed. For

example, the Pinal AMA i s now i n v e s t i g a t i n g the 48 most hazardous of the

500 wells found i n i t s area. The Phoenix AMA does not presently have

resources to follow up on any of the 100 wells found i n i t s area. Other

open we1 Is discovered outside the a c t i v e management areas are also a low

p r i o r i t y for DWR f o l low- up.

A recently drafted p o l i c y d i r e c t i v e on open wells does not ensure that

a l l hazardous wells w i l l be addressed i n a timely manner, i f at a l l . The

d i r e c t i v e s use distance from inhabited areas as a c r i t e r i a for

categorizing open wells by hazard l e v e l . A well a t least 8 inches i n

diameter which i s w i t h i n 100 feet of an inhabited area i s considered the

most hazardous and w i l l receive immediate a t t e n t i o n . A s i m i l a r well

w i t h i n 300 feet w i l l not to be addressed immediately but w i l l be

scheduled for follow- up along w i t h other p r i o r i t i e s . Wells f a r t h e r from

inhabited areas may not be addressed at a l I . To chi ldren playing near

these wells, the d i f f e r e n c e s i n distance between 100 feet and 301 feet

may not be s u f f i c i e n t t o prevent an accident.

Open Well Enforcement Program

Could Be Funded Several Ways

DWR and the L e g i s l a t u r e should consider several methods to fund a more

e f f e c t i v e open well enforcement program. Other revenue sources may be

a v a i l a b l e to supplement general fund monies.

Cost o f program - DWR has estimated that an open we1 l enforcement

program would require $ 239,000 to fund i n i t s f i r s t year. The program

would employ eight s t a f f ( i n c l u d i n g three l imi ted p o s i t ions) who would

work i n the Phoenix, Tucson, and Pinal AMAs and i n the central o f f i c e .

These s t a f f would be responsible for discovering open w e l l s , p r i o r i t i z i n g

wells based on hazard l e v e l , performing ownership searches, n o t i f y i n g and

working w i th owners t o cap we l l s , and conduct i ng fo l l ow- up.

Funding would be reduced i n subsequent years as the backlog of open wells

requiring follow- up i s reduced or eliminated. DWR estimates that

$ 148,600 would be s u f f i c i e n t to operate an adequate open well enforcement

program in i t s f o u r t h year.

Funding - In a d d i t i o n t o using general fund monies, DWR and the

Legislature should consider other methods for funding an open well

enforcement program. The department's enforcement fund i s one source of

additional support. Arizona's groundwater management code permits the

use of enforcement fund money for the capping of high hazard w e l l s . DWR

has proposed using some of these monies for we1 l capping. The department

can l a t e r seek reimbursement from well owners. The enforcement fund,

which c o l l e c t s monies from code v i o l a t o r s , c u r r e n t l y has a balance of

$ 215,850 and generates approximately $ 100,000 annually. However, the

amount of enforcement funds a v a i l a b l e f o r the open well program may be

l i m i t e d . DWR has i n d i c a t e d t h a t some of these monies are needed to h i r e

an enforcement attorney and support s t a f f to address the backlog of other

enforcement act ions.

Another innovative way to fund a t least a p o r t i o n o f the program would

involve p l a c i n g a tax or surcharge on f e r t i l i z e r s and/ or p e s t i c i d e s sold

i n Arizona. Iowa has adopted t h i s method to fund a s u b s t a n t i a l p o r t i o n

of i t s groundwater management program. "' This approach i s based on

the philosophy that f e r t i l i z e r s and p e s t i c i d e s pose a threat to the

aquifers through open we1 I s , and therefore, users of substances which may

enter and p o l l u t e the a q u i f e r through open w e l l s should help pay to

remove the t h r e a t .

A tax on f e r t i l i z e r could raise a s i g n i f i c a n t amount of revenue w i t h

minimal impact on the p r i c e of f e r t i l i z e r . According to the Arizona

State Chemist, approximately 300,000 tons of f e r t i l i z e r s are used i n the

State each year. A charge of 80 cents per ton, which represents less

than one percent of the purchase p r i c e of a ton of f e r t i l i z e r , would

generate $ 240,000 i n enforcement funds. ( 2 ) A lower f e r t i l i z e r tax

could be imposed i f p e s t i c i d e s were also taxed.

RECOMUENDAT l ONS

1. DWR should improve e f f o r t s to discover open w e l l s by:

a. Assigning employees who spend time i n the f i e l d s p e c i f i c

r e s p o n s i b i l i t y for i d e n t i f y i n g and documenting open w e l l s , and

b. Using the we1 l r e g i s t r y to a s s i s t i n e f f o r t s to locate open

we1 I s .

2. DWR should reevaluate i t s c r i t e r i a for determining open well hazard

levels to determine i f these c r i t e r i a adequately protect the p u b l i c .

Iowa taxes a l l f e r t i l i z e r s c o n t a i n i n g n i t r o g e n a t the r a t e of 75 cents per ton. I n

a d d i t i o n , p e s t i c i d e manufacturers are charged o n e - f i f t h of one percent o f t h e i r

gross annual sales ($ 250 minimum and $ 3,000 maximum charge), and p e s t i c i d e dealers

are taxed one- tenth of one percent of gross annual sales.

( 2 ) A tax o r surcharge on f e r t i l i z e r would not be d i f f i c u l t t o administer. The State

Chemist already c o l l e c t s a s i m i l a r tax of 25 cents per ton o f f e r t i l i z e r sold.

This e x i s t i n g tax, which supports operations of the State Chemist's o f f i c e , i s paid

by licensed dealers who r e p o r t sales on a quarter1 y basis t o the State Chemist.

3. The Legislature should consider r e q u i r i n g open w e l l i n f o r m a t i o n to be

reported on a l l conveyance reports processed by the department.

4. The Legislature and DWR should consider several d i f f e r e n t methods for

funding an open well enforcement program.

FINDING IV

THE STATE COULD SAVE AT LEAST $ 1.5 MILL l ON ANNUALLY

BY INCREASING THE GROUNDWATER WITHDRAWAL FEE

The State would save at least $ 1.5 m i l l i o n annually i f the Department of

Water Resources were allowed to raise i t s groundwater withdrawal fee.

Although groundwater withdrawal fees were intended to finance h a l f the

cost for administration and enforcement of the groundwater code, a

separate provision i n the code p r o h i b i t s the agency from c o l l e c t i n g t h i s

amount. A change i n s t a t u t e to allow DWR to c o l l e c t s u f f i c i e n t monies

would r e s u l t i n only a minimal increase i n water costs.

A Provision i n the Groundwater Code Prevents

DWR from C o l l e c t i n g S u f f i c i e n t Fees for

~ ~. Administration and Enforcement

Though State law mandates that groundwater user fees finance h a l f the

cost of groundwater code r e g u l a t i o n , a separate provision r e s t r i c t s DWRts

a b i l i t y to do t h i s . Arizona Revised Statutes ( A. R. S.) $ 45- 612 s p e c i f i e s

that the d i r e c t o r of DWR each year:

It . . . s h a l l estimate the t o t a l amount of groundwater withdrawn

i n a l l active management areas.. . and set the a d m i n i s t r a t i o n and

enforcement fee . . . to produce an amount equal to one- half of the

amount budgeted by the d i r e c t o r for administration and

enforcement purposes for the f o l lowing f i s c a l year ." ( emphasis

added)

However, A. R. S. 945- 611.1 p r o h i b i t s the agency from assessing a user fee

of more than one d o l l a r per acre- foot. According t o former Commission

s t a f f , t h i s cap on fees was a compromise agreed to by the Groundwater

Management Study Commission to help insure the support of a g r i c u l t u r a l

i n t e r e s t s f o r the groundwater code. A representative from the

Agri- Business Council of Arizona agrees that farmers at the time

supported the one d o l l a r l i m i t to minimize the economic impact of a

withdrawal fee. Consequently, the fee was l i m i t e d to one d o l l a r even

though 1) i t was not demonstrated that a higher fee would produce

f i n a n c i a l hardship for water users; and 2) the costs for r e g u l a t i n g

groundwater use were unknown at the time.

The one d o l l a r per acre- foot l i m i t has i n fact prevented DWR from

c o l l e c t i n g monies s u f f i c i e n t to cover h a l f the cost of groundwater code

regulation. For example, the cost for code regulation i n f i s c a l year

1988 was an estimated $ 5,252,804. Because of the current l i m i t on fees,

the department was only able to assess approximately $ 1 ,712,000 i n fees,

or 33 percent of the cost to regulate the groundwater code. The

department's budget o f f i c e p r o j e c t s a greater s h o r t f a l l for f i s c a l year

1990, and estimates t h a t o n l y 27 percent of DWR's expenses for

code- related a d m i n i s t r a t i o n and enforcement w i l l be covered.

Funding not derived from groundwater users i s supplemented through other

general fund appropriations. For f i s c a l year 1990, DWR estimates that

approximately $ 1,500,000 i n a d d i t i o n a l revenue w i l l be needed from the

general fund to compensate for the s h o r t f a l l i n user fees. The

department estimates that user fees would have to be raised an a d d i t i o n a l

$. 87 per acre foot to e l i m i n a t e t h i s s h o r t f a l I.

A Change i n Statute Would Result in Only

a Minimal Increase i n Water Costs

Our analysis indicates that r a i s i n g the groundwater withdrawal fee to

cover h a l f the cost of code administration and enforcement would r e s u l t

i n only a minimal increase i n water costs. ' I' The current average

cost for pumping groundwater i n the Phoenix a c t i v e management area i s

$ 32.73 per acre- foot. For example, r a i s i n g the groundwater fee $ 1 . OO an

acre- foot to cover current costs would only increase users' per acre cost

by approximately three percent and would not s i g n i f i c a n t l y add to the

overal I water cost incurred by i r r igat ion users'!'

RECOWENDAT I ON

The Legislature should consider amending A. R. S. $ 45- 611 . I to raise or

remove the current l i m i t on groundwater fee assessments so that DWR can

c o l l e c t monies s u f f i c i e n t t o finance h a l f the costs for administering and

enforcing the groundwater code as required by A. R. S. $ 45- 612.

( I) Derived from economic data compiled by DWR.

( 2 This analysis does not i n c l u d e any a d d i t i o n a l w e l l or other enforcement costs that

may be approved by the L e g i s l a t u r e and funded from the general fund as a r e s u l t of

t h i s r e p o r t .

FINDING V

WATER RIGHTS CLAIMANTS SHOULD SUPPORT

A GREATER SHARE OF THE ADJUDICATIONS COSTS

Claimants who w i l l b e n e f i t from the outcome o f general adjudications

should support a greater p o r t i o n of t h e i r costs. F i l i n g fees paid by

claimants are i n s u f f i c i e n t to recover most of DWR's a d m i n i s t r a t i v e costs

which are c u r r e n t l y supported by a general fund a p p r o p r i a t i o n . Because

claimants w i l l b e n e f i t more than the general p u b l i c from water r i g h t s

adjudications, the L e g i s l a t u r e should consider amending current law to

allow for a more equitable sharing o f t h i s growing and long- term cost

burden .

General Water R i g h t s A d j u d i c a t i o n s

According to State law, a l l surface water belongs to the p u b l i c but i s

subject to appropriation for b e n e f i c i a l uses. B e n e f i c i a l uses include

i r r i g a t i o n , mining, power generation, watering of s t o c k , r e c r e a t i o n , and

municipal and other uses. Water r i g h t s , which are r e a l p r o p e r t y r i g h t s

s i m i l a r to r i g h t s to land, are established and based on appropriations of

water for b e n e f i c i a l uses. The extent and p r i o r i t y of each water r i g h t

depends on the nature and amount of water use and when the water was

f i r s t appropriated for t h i s purpose. In times of shortage, the oldest

water r i g h t s take precedence.

Adjudication of surface water r i g h t s i s needed i n Arizona to s e t t l e

Indian claims. Therefore, i n 1979, the Legislature enacted s t a t u t o r y

provisions ( Laws of 1979, Chapter 139) a u t h o r i z i n g a general a d j u d i c a t i o n

i n State courts. This l e g i s l a t i o n was intended to permit settlement of

Indian water r i g h t s claims w i t h i n a framework established by federal law

and the U. S. Supreme Court. For example, S t a t e a d j u d i c a t i o n s must be

j u d i c i a l , not a d m i n i s t r a t i v e , determinations. Therefore, the 1979

l e g i s l a t i o n t r a n s f e r r e d a d j u d i c a t i o n a u t h o r i t y from the State Land

Department to Super i or Court.

Two a d j u d i c a t i o n s a r e c u r r e n t l y i n progress. The largest i n v o l v i n g the

G i l a River system ( w i t h over 62,000 claims) i s before the court i n

Maricopa County. An a d j u d i c a t i o n of the L i t t l e Colorado River ( i n v o l v i n g

approximately 11,000 claims) i s underway i n Apache County Superior

Court. These a d j u d i c a t i o n s are expected t o take at least ten years to

complete. Claimants i n b o t h a d j u d i c a t i o n s are d i v e r s e ; they include

State and federal agencies, c i t i e s and towns, p u b l i c u t i l i t i e s , mining

companies, i r r i g a t i o n d i s t r i c t s , as well as many i n d i v i d u a l s and small

water users.

Dm's r o l e - DWR i s responsible f o r p r o v i d i n g s t a f f support to the

courts. The department handles legal service and process ( legal not i ce) ,

maintains records o f claims, and conducts technical s t u d i e s ,

i n v e s t i g a t i o n s , and analyses. Water r i g h t claims must be i n v e s t i g a t e d

and v e r i f i e d by DWR s t a f f .

One of DWR's major tasks i s to prepare h y d r o l o g i c a l survey reports ( HSRs)

f o r each a d j u d i c a t i o n . These r e p o r t s i n v e n t o r y water uses, r i g h t s ,

claims, and hydrology w i t h i n watersheds. Each a d j u d i c a t i o n generates

m u l t i p l e volume HSRs which are subject to review and comment by claimants.

Claimants W i l l B e n e f i t

from Adjudications

While the general p u b l i c may b e n e f i t from a d j u d i c a t i o n s of surface water

r i g h t s , water r i g h t s claimants c l e a r l y have a more d i r e c t i n t e r e s t i n the

process. Claimants have more to gain or lose from the a d j u d i c a t i o n s .

According to DWR o f f i c i a l s , a d j u d i c a t i o n of water r i g h t s i s important to

remove u n c e r t a i n t y over what water i s a v a i l a b l e to the State and to

permit management of t h i s v i t a l resource. Water r i g h t s claimants,

however, appear to have a more d i r e c t i n t e r e s t i n , and more to g a i n o r

lose, from a d j u d i c a t i o n s than the general p u b l i c .

According to a professor of law a t the U n i v e r s i t y of Montana who i s

knowledgeable i n western water r i g h t s a d j u d i c a t i o n s , water r i g h t s can

a f f e c t the value of land and influence land transactions. I n a recent

a r t i c l e , he s t a t e d :

I' Throughout the West, l e g i s l a t u r e s recognized the d e s i r a b i l i t y of

a permanent record of water r i g h t s so that people could t e l l how

many r i g h t s there were on a p a r t i c u l a r source and t h e i r amounts

and p r i o r i t y dates. Such information was e s s e n t i a l to current

holders of water r i g h t s , people who might be considering a new

appropriation and those contemplating purchase of property to

which a water r i g h t i s attached. The l a t t e r was p a r t i c u l a r l y

important because the p o t e n t i a l buyer would want to know the

value of the r i g h t , which would depend on i t s volume and i t s

p r i o r i t y i n r e l a t i o n to other water r i g h t s . " ( ' 1

Since claimants b e n e f i t from the a d j u d i c a t i o n s process, r e q u i r i n g fees or

assessments to support the cost i s accepted p u b l i c p o l i c y i n Arizona and

same ~ t h e r ! vestern s t a t e s . The o r i g i n a l l e g i s l a t i o n a u t h o r i z i n g

adjudications i n Arizona required a f i l i n g fee which was intended to be

used to support DWR's costs for service and process and for masters

( hearing o f f i c e r s who w i l l be appointed and compensated by the

court^).'^' A. R. S. 545- 254 requires t h a t i n d i v i d u a l s f i l ing a water

r i g h t claim pay a one- time fee of $ 20 for each claim f i l e d .

Corporations, c i t i e s , State agencies, p o l i t i c a l subdivisions,

associations, and partnerships must pay $ 20 or 2 cents per acre- foot

claimed, whichever i s g r e a t e r . I n d i a n t r i b e s are the only p a r t i e s

s p e c i f i c a l l y exempted from the f i l i n g fee requirement.

Fees Collected Are I n s u f f i c i e n t

to Recover DWR Costs

Fees c o l l e c t e d w i l l be i n s u f f i c i e n t to recover even the l i m i t e d DWR costs

i d e n t i f i e d by law. As of March 1989, DWR has c o l l e c t e d $ 1,788,867 i n

f i l i n g fees for the G i l a and L i t t l e Colorado a d j u d i c a t i o n s . Since most

claimants have f i l e d , l i t t l e a d d i t i o n a l fee revenue i s a n t i c i p a t e d .

These monies w i l l be i n s u f f i c i e n t to cover DWR's c o s t s i n c u r r e d i n

e f f e c t i n g legal n o t i c e . DWR's costs f o r legal process and service

( 1 ) A l b e r t W. Stone, " Montana Water A d j u d i c a t i o n : A Centennial H i s t o r y ," Western

Wildlands ( Winter 1989): 18- 24.

( * ) Masters w i l l conduct hearings and r e p o r t to the court on l e g a l and f a c t u a l matters

involved i n d e c i d i n g e n t i t l e m e n t s and p r i o r i t y of water r i g h t s .

totaled $ 1,859,412 as of December 30, 1988. These costs already exceed

the amount of fee revenues col lected. Moreover, court master costs must

be reimbursed f i r s t . Therefore, i t i s u n l i k e l y that a l l DWR costs for

legal process and servi ce w i l l be recovered !"

While statutes provide for recovery of DWR's cost for legal process and

service, none of the agency's other a d m i n i s t r a t i v e expenses are subject

to cost recovery under current law. DWR's costs for administering

adjudications have increased g r e a t l y i n recent years. Since 1983,

s t a f f i n g has grown to 42 f u l l - t i m e equivalent p o s i t i o n s . The department

expended over $ 1.4 mi l l ion on adjudications i n FY 1988 and expects to

spend nearly $ 1.8 m i l l i o n during the current f i s c a l year. According to

one DWR o f f i c i a l , no one a n t i c i p a t e d a d m i n i s t r a t i v e expenses would be so

s u b s t a n t i a l .

Unless claimants support a greater p o r t i o n of the burden, adjudications

w i l l continue to require s u b s t a n t i a l general fund revenues annually w i t h

no known or c e r t a i n ending date i n s i g h t . DWR has requested four

a d d i t i o n a l p o s i t i o n s f o r FY 1990, and o f f i c i a l s i n d i c a t e that the agency

may eventually need 50 or more s t a f f t o properly f u l f i l l i t s

r e s p o n s i b i l i t i e s .

Statutory Revisions Could Require

a More Equitable Sharing o f Costs

The Legislature could amend current statutes to allow for a more

equitable sharing of DWR's a d m i n i s t r a t i v e costs. Precedents for t h i s

cost- sharing can be found i n other sections of Arizona water law and i n

that of other western s t a t e s . A t least one western s t a t e , Idaho, has

also extended t h i s p o l i c y t o general adjudications of water r i g h t s .

Precedents for " user" fees - Assessing water users and regulated

e n t i t i e s for a greater p o r t i o n of the costs of administering Arizona

( 1 DWR plans to hold fee revenues and apply i n t e r e s t earnings, and p r i n c i p a l i f

necessary, to pay f o r master costs. The department estimates t h a t master costs may

t o t a l $ 150,000 annually. However, costs may be greater and i n t e r e s t earnings alone

may not be s u f f i c i e n t t o cover these costs.

water laws has precedent under current law. As noted i n Finding IV ( page

3 3 ) , A . R . S . 545- 611.1 requires groundwater users to pay an annual fee to

support DWR costs t o enforce the p r o v i s i o n s of the Groundwater Management

Act. A. R. S. 345- 612 requires groundwater user fees s u f f i c i e n t to cover

one- half of DWR's costs of a d m i n i s t r a t i n g and enforcing the a c t .

One s t a t e has plans to e s t a b l i s h a " water master" a d m i n i s t r a t i v e agency

which i s f u l l y s e l f - s u p p o r t i n g through user fees. Texas i s e s t a b l i s h i n g

t h i s operation to monitor and enforce water r i g h t s . The a n t i c i p a t e d

$ 200,000 annual cost of the operation w i l l be recovered through fees

charged to each water r i g h t holder.

Another s t a t e has extended t h i s concept to general water r i g h t s

adjudications. ldaho has established what i s intended t o be a f u l l y

self- supporting process f o r the Snake R i v e r b a s i n a d j u d i c a t i o n . This

a d j u d i c a t i o n w i l l involve 87 percent of the s t a t e ' s land mass, and i s

expected to cost about $ 28 m i l l i o n over a ten- year period. Each claimant

i s required to pay a f e e , e s t a b l ished by law, based on type of use and

water q u a n t i t y o r power g e n e r a t i n g c a p a c i t y , Fees range from a minimum

of $ 25 for small domestic uses to an estimated $ 5.5 m i l l ion which w i l l be

paid by a major u t i l i t y company.

According to the c h i e f of Idaho's a d j u d i c a t i o n s bureau, fees were

established a f t e r r e c e i v i n g input from a c i t i z e n s ' committee set up to

f i n d a way t o e q u i t a b l y finance the a d j u d i c a t i o n . This o f f i c i a l

i n d i c a t e d t h a t t h e r e had been l i m i t e d success i n g e t t i n g general fund

revenues to support the a d j u d i c a t i o n , y e t , everyone recognized the

b e n e f i t of ~ l i m i n a t i n g the u n c e r t a i n t y over what water was a v a i l a b l e .

The u t i l i t y company, for example, was so committed t o having the

a d j u d i c a t i o n take place t h a t i t was w i l l i n g to pay m i l l i o n s t o support i t .

Arizona a d j u d i c a t i o n fees are low - By c o n t r a s t , claimants i n Arizona

have contributed f a r less to support a d j u d i c a t i o n s . One- time fees

generated as of March 1989 represent an average of about $ 24 per claim

f i l e d . This i s s l i g h t l y less than the minimum fee which w i l l be paid i n

ldaho by small domestic and stock water users.

Government agencies have paid the most to support the a d j u d i c a t i o n s i n

Arizona. The U. S. Forest Service has paid $ 239,140 f o r water r i g h t s

claims i n A r i z o n a ' s n a t i o n a l f o r e s t s . The Arizona State Land Department,

the second highest payer, remitted $ 154,817 to the Department o f Water

Resources for claims on State lands. Among Arizona c i t i e s and counties,

the c i t y of Phoenix has paid the most ($ 65,514) i n f i l i n g fees. Power

companies, i r r i g a t i o n d i s t r i c t s , and other water users have paid

considerably less. The Salt R i v e r P r o j e c t has paid $ 57,101, and Arizona

Public Service has paid $ 5,510. The highest paying i r r i g a t i o n d i s t r i c t

i s the Maricopa- Stanfield d i s t r i c t which remitted $ 7,566 to DWR!"

One DWR o f f i c i a l argues that a d d i t i o n a l fees should not be assessed. He

fears objections by claimants who may drop out of the process and r i s k

i t s v i a b i l i t y . This i s not l i k e l y to happen, however, for two reasons.

F i r s t , p a r t i e s claiming smaller amounts of water would not be

s i g n i f i c a n t l y impacted by a d d i t i o n a l assessments i f an approach s i m i l a r

to Idaho's were adopted. Estimates provided by the Idaho Department of

Water Resources i n d i c a t e t h a t almost 89 percent of t o t a l revenues to be

raised through fees w i l l come from the largest water users who represent

only about one- third of a l l claimants. Second, larger users of water,

who would be impacted by a d d i t i o n a l assessments, are not l i k e l y to drop

out of the process because they have the most to lose and would

jeopardize t h e i r water r i g h t s . Since these claimants have paid such a

small proportion to support DWR costs thus f a r , i t i s not unreasonable to

expect a greater cost- sharing commitment from them.

( 1 These amounts are based p r i m a r i l y on computer generated data provided by the

Department o f Water Resources and were confirmed w i t h the organization named. I n

two cases, small discrepancies (+ about 1 percent) w i t h claimant records were

i d e n t i f i e d . DWR has n o t audited claims t o determine i f amounts paid comply w i t h

s t a t u t o r y requirements. Therefore, amounts quoted could represent under or over

payments.

The Legislature could amend current s t a t u t e s t o permit a d d i t i o n a l

assessments of claimants on an equitable b a s i s . "' In considering

s t a t u t o r y revisions, the Legislature could requi r e t h a t e i t h e r a p o r t i o n

or a l l of DWR's a d m i n i s t r a t i v e costs be recovered. In a d d i t i o n ,

exemptions for small domestic or stock water users could be considered i f

a d d i t i o n a l fees were deemed to be u n f a i r or a f i n a n c i a l burden.

RECOWENDAT I ONS

1. The Legislature should consider enacting s t a t u t o r y provisions to

permit additional assessments of claimants for a l l or a p o r t i o n of

DWR's administrative costs for adjudications.

2. DWR should undertake a d d i t i o n a l analysis of f u t u r e a n t i c i p a t e d costs,

including the p o t e n t i a l cost of masters, to a i d i n the development of

equitable fee l e v e l s .

( 1 It i s i n t e r e s t i n g t o note t h a t recent l e g i s l a t i o n supported by DWR went i n a

contrary d i r e c t i o n by l i m i t i n g future assessments o f claimants. P r i o r t o enactment

of Senate B i l l 1245 i n 1988, fee revenues c o l l e c t e d could be applied f i r s t t o DWR's

service and process costs. A l l remaining funds would be a v a i l a b l e t o pay f o r the

cost of hearing o f f i c e r s under the provisions of A. R. S. 545- 255.8. I f funds were

i n s u f f i c i e n t , the court could impose an a d d i t i o n a l assessment a t i t s d i s c r e t i o n t o

cover the cost o f the hearing o f f i c e r s . I n supporting SB 1245, DWR, i n e f f e c t ,

delayed and l i m i t e d recovery of i t s own a d m i n i s t r a t i v e costs since, as noted

e a r l i e r , funds w i l l f i r s t go t o pay f o r the c o u r t ' s masters.

August 24, 1989

Mr. Douglas R. Norton

Auditor General

2700 North Central Avenue, Suite 700

Phoenix, AZ 85004

Dear Mr. Norton:

The Department of Water Resources has completed its

review of the draft report of performance audit which your agency

has completed as part of the Sunset Review required by statute.

This letter, along with the responses on particular findings in

the report ( Attachment One), constitutes the Department's com-ments

to the report.

The Department generally agrees with the draft report of

performance audit. The report finds that the Department has

effectively performed its responsibilities in implementing the

Groundwater Code and performing its other water management and

public health and safety functions. In the two areas where the

Department's effectiveness could be improved, the draft report

concludes that additional funding is required. The Department

will seek additional funding for the two areas, ( 1) stronger

enforcement of the Groundwater Code's conservation and allocation

requirements and ( 2) additional effort on capping hazardous open

wells.

In assessing the Groundwater Code, the draft report

concludes that the Code is needed and has provided better water

management in Arizona. Terminating the Department, and by impli-cation

the Groundwater Code, could cause significant harm to the

public's health, safety, and welfare.

As the draft report states, the Department has consis-tently

sought legislation to address deficiencies in the enabling

statutes under which it operates. The Department utilizes both

an annual omnibus groundwater bill supported by the water com-munity

and individually sponsored bills which may not have uni-versal

support.

The Department disagrees with the draft report only as

to Findings One and Five. Finding One is that a Groundwater Code

study commission should be convened by the Legislature to address

perceived problems with the Code. As stated in the attached

response to Finding One, the Department believes that the goal of

safe yield, the assured water supply provisions, and the per

capita measure of municipal conservation measures require little

M r . Douglas R. Norton

August 24, 1989

Page Two

or no change a t t h i s time. To t h e e x t e n t t h a t some amendment of

t h e per c a p i t a measurement is d e s i r a b l e , and i n regard t o t h e

o t h e r s t a t u t o r y changes i d e n t i f i e d as d e s i r a b l e i n t h e p r e l i m i -

nary r e p o r t , t h e e x i s t i n g mechanisms now u t i l i z e d by t h e Depart-ment

are adequate. A study commission along t h e l i n e s o f t h e

1977 Groundwater Study Commission is unnecessary a t t h i s time and

could g e n e r a t e d i v i s i v e a t t e m p t s to a l t e r t h e b a s i c s t r u c t u r e of

t h e Code which, t h e d r a f t r e p o r t f i n d s , h a s served Arizona so

w e l l .

Finding Five is t h a t i n c r e a s e d f e e s should be a s s e s s e d

t o c l a i m a n t s i n t h e g e n e r a l a d j u d i c a t i o n of water r i g h t s . A s set

f o r t h i n t h e a t t a c h e d response to F i n d i n g F i v e , t h e Department

b e l i e v e s t h a t t h e a d j u d i c a t i o n s provide a b e n e f i t t o a l l resi-d

e n t s of Arizona and c l a i m a n t f e e s should n o t be i n c r e a s e d .

In c o n c l u s i o n , I want to e x p r e s s my a p p r e c i a t i o n f o r t h e

f i n e p r o f e s s i o n a l work done by your s t a f f o f a u d i t o r s . Their

t h o u g h t f u l and i n t e n s i v e study of t h e Department of Water

Resources and its s t a t u t o r y mandates w i l l f u r t h e r t h e g o a l of

e f f e c t i v e and e f f i c i e n t s t a t e government.

N. W. Plummer

Director of Water Resources

NWP : ea

Enclosure -

Attachment One

ATTACHMENT ONE

ARIZONA DEPARTMENT OF WATER RESOURCES

Responses to Auditor General's Findings

Sunset Review

Draft Report of Performance Audit

Finding I: To Help Ensure More Effective Water Manage-ment,

The Legislature Should Address Several Problems

That Have Surfaced Since The Groundwater Code's Incep-tion

in 1980.

A. Groundwater Code Is Needed and Has Provided

Better Water Management

The Department agrees with this finding. In this desert

state, only focused water management and a dedicated commitment

to water conservation will assure the continued availability of

the water needed for current uses and future development. The

Department is committed to fair and effective implementation of

its statutory responsibilities.

B. Several Code Provisions May Not Provide for

Effective Water Management: Safe Yield.

It would be a fundamental mistake to eliminate all ref-erences

to a management goal from the Groundwater Code. The

current levels of groundwater overdraft in the Active Management

Areas ( AMAs) will ultimately lead to a disastrous long term re-sult.

It is imperative to create a strong regulatory incentive

which makes the purchase and use of Central Arizona Project water

as a replacement for mined groundwater a necessity. This can

only be accomplished by establishing a goal which limits the

future access to groundwater as a basic supply source. This is

especially true for municipal water use, where the demands for

water are likely to more than double over the next 40 years. The

goal as it affects the ability to demonstrate an assured water

supply is a critical water management tool and therefore must be

retained.

The existence of large quantities of groundwater in

storage does not mean that a safe yield goal is unnecessary.

Although the Phoenix AMA now has 160 million acre feet in stor-age,

it had 240 million acre feet in storage before modern deve-lopment

began. That 33% reduction in the amount stored within

just a few decades emphasizes the need for a safe yield goal.

Projections that the amount remaining in storage will last for

several hundred years are valid only if CAP water is fully uti-lized

and the Groundwater Code, with its safe yield goal, is

fully implemented.

In spite of the overriding goal, most of the Code's

provisions are not based on resource based considerations. The

amount of water allocated to a farm through the water duty calcu-lation

or to municipalities and industries is based entirely upon

the volume needed to achieve beneficial use, assuming water con-servation

measures. These volumes are in fact a license to over-draft

groundwater. If the safe yield goal were really the deter-mining

factor in the water management scheme, then water alloca-tions

would have been based on a decreasing pro rata reduction in

groundwater until the safe yield level is reached. However,

abandoning the goal of safe yield by 2025 because we may not

succeed in reaching it would be like abandoning a fire prevention

goal because not all fires could be avoided.

The need for water conservation and better water manage-ment

is not synonymous with the need to achieve the particular

goal of safe yield. While the Code establishes a safe yield goal

for the three metropolitan AMAs, most of the water management

provisions in the Code are actually independent of having such a

qoal. The Groundwater Code generally utilizes the approach of an

equitable allocation of groundwater resources. It is important

to note that the basic operating tenets of the Code are identical

in the Pinal AMA, which does not have a safe yield goal, to those

in the safe yield AMAs. Regardless of the goal, grandfathered

rights are established; service area rights are determined; allo-cations

based on conservation requirements are set forth in the

management plans; and all well construction rules and regulations

are accomplished in a consistent fashion. These provisions are

the substance of the Groundwater Code. In fact, the management

goal has very few applications in the day to day administration

of the Code.

The establishment of safe yield as the goal has three

major policy implications. First, it sets the level and degree

to which augmentation may be needed. The need for new projects

or for water importation is dependent upon the goal. Second, the

goal has a major effect on how much groundwater is allowed for

demonstration of assured water supplies for municipal development

purposes. Third, the goal determines the ultimate need for the

purchase and retirement of grandfathered rights after the year

2005.

The real issue which needs to be addressed is whether or

not the strict goal of safe yield by 2025 is appropriate. As the

Auditor General's report states, the AMAs are not yet at safe

yield, and may not succeed in reaching that goal by 2025. There-fore,

this state can expect to see declining groundwater tables

until at least 2025. At that time, if it appears that additional

declines in the groundwater table are economically and political-ly

acceptable, perhaps a different management goal should be

set. That goal might be safe yield by a date later than 2025, or

safe yield at a particular depth to water ( the Department now

allows new developments which are projected to cause the ground-water

table to drop to 1200 feet).

Whichever management goal is selected, however, no one

should lose sight of the overriding conclusion of the Auditor

General that "[ tlhe groundwater code is needed because it has

provided better water management in Arizona."

C. Assured Water Supply Provisions Can Work

Against Safe Yield.

The report indicates that the assured water supply pro-visions

could work against the safe yield goal and therefore

should be re- examined. Because the Department has taken an ap-proach

of phasing in the reduction of groundwater in the assured

supply test in order to minimize economic impacts, the result

described in the report has occurred to date. Minimizing econo-mic

impacts is certainly within the spirit of the Groundwater

Code, which was adopted to protect and stabilize the general

economy and welfare of this state and its citizens. However, the

conclusion that allocation of groundwater for an assured supply

demonstration works against the safe yield goal is correct.

The Department disagrees with this finding of the draft

report, because correction of this impact on safe yield does not

require review of the assured water supply statute. A change in

the policy by the Department in how it implements this provision

is all that is needed. One interpretation of the statutory lan-guage

is that all new assured supplies must be consistent with

achievement of the management goal, and therefore no volume of

mined groundwater component may be included. In other words, the

Department could solve this problem administratively by adopting

much more restrictive policies and rules for use of groundwater

in the demonstration of an assured water supply. The Department

is currently in the process of formulating rules to address this

issue.

D. Problems with the Code's Municipal Conservation

Measure.

While there may be some problems with the use of gallons

per capita per day as a measurement tool for level of conserva-tion,

this system is the most commonly used measure in the water

industry. Clearly, the City of Tucson dramatically reduced its

average gallons per person per day rate when it undertook a major

water conservation effort in the 1970' s. Although a per capita

requirement may not fully reflect efficient water use, to date no

one has yet developed a clearly superior alternative to the pres-ent

system. However, the Department is in the process of deve-loping

an amendment to the per capita provision which may provide

an alternate measure of groundwater conservation for municipal

uses. Therefore, the Department agrees that the per capita con-servation

requirement in the Code should be reviewed.

The Department disagrees with this finding on the ques-tions

of improper application of the existing statute and. whether

the statute works against the safe yield goal. In fact, the

Department has properly interpreted the statutory requirement for

reasonable reductions in groundwater use per capita in adopting

the management plans. Arizona's desert environment is subject to

great fluctuations in available surface water supplies, including

CAP supplies. Groundwater tends to be available on a more con-sistent

basis, even when surface water or other renewable sup-plies

are severely curtailed. In determining what constitutes a

reasonable reduction in groundwater use, the Department has had

to consider that, in practice, the amounts of groundwater used

each year will vary unpredictably over a ten- year management

period, depending on what renewable supplies are available.

Therefore, the Department has adopted a per capita measurement

for groundwater reductions by setting a reasonable level of total

water use.

In drought years, when renewable supplies are not avail-able,

the entire amount of water served by a municipal provider

may be groundwater. In wet years, when renewable supplies are

relatively abundant, the Department effectively subtracts the

renewable supplies used from the goal of the total water use

rate. The remainder is the amount of groundwater that may be

used based on reasonable reductions in use.

Only the groundwater portion of the total water used is

subject to the strictures of the management plans. However, the

Department cannot ignore other water used in determining whether

the groundwater use was reasonable.

An example will illustrate how the per capita rate re-quirements

work. A municipal provider may have served 300 gal-lons

per capita of water per day ( GPCD) to its residents in 1980,

with one- third of its supply surface water ( 100 GPCD) and two-thirds

of its supply groundwater ( 200 GPCD). Its goal for total

water use for 1987 might be 280 GPCD, without regard to whether

the groundwater portion of the supply remains at 200 GPCD, in-creases,

or decreases. The municipal provider would be in com-pliance

with its goals in 1987 if it used 280 GPCD or less, in-cluding

all sources of water. Thus, the provider would not have

been penalized if 1987 was a drought year, the surface water

portion of its supply was reduced to 50 GPCD, and groundwater use

was increased to 230 GPCD to make up the difference. On the

other hand, if 1987 happened to be a wet year so that 200 GPCD of

surface water was used, the municipal provider would not be in

compliance if it also served 180 GPCD of groundwater, for a total

water use of 380 GPCD. In that case, even though the groundwater

portion of the GPCD was reduced by 20 GPCD, the reduction would

not be reasonable because it would be without regard to increases

in other water used.

The Department's interpretation of the municipal water

per capita requirements of the Groundwater Code is the only ra-

tional way to deal with a variable water supply. While the De-partment

enforces only against use of groundwater in excess of a

GPCD goal, the Department must consider groundwater use against a

background of other water use.

The Department's policy of taking surface water into

account in determining what groundwater use reductions are rea-sonable

does not work contrary to the Code's safe yield goal. A

city or other municipal provider is never penalized for increas-ing

the percentage of its surface water use. However, a provider

is not rewarded for increasinq its use of surface water if the

provider also wastes groundwater. By requiring that all ground-water

use be based on a conservation standard, the Department is

moving in the direction of the safe yield goal.

E. Other Findings.

The Department generally agrees with the other findings

of the need for more comprehensive water management, regulatory

authority over effluent, incentives for the increased use of non-groundwater,

and the benefits of a metropolitan, regional or

state- wide water district. The Department is working now to

develop legislative initiatives on these matters.

F. Study Commission Recommendation.

A study commission to address changes to the Code is

unnecessary and undesirable. The Department regularly convenes

an ad hoc " rump group" to develop consensus on changes needed to

the Code. To the extent that complete consensus is not possible,

the Department has worked with members of the water community to

develop legislative changes in the public interest. This pro-cess,

generally led by the Department, has resulted in changes

such as the recharge project law and the restrictions on artifi-cial

lakes.

The Code was the result of numerous negotiated compro-mises

and agreements. Opening up the process to review may lead

to requests for basic structural changes to the Code which could

threaten the accomplishments of the Code to date. The Code

should not be exposed to the dangers of opening it up to the

ripple effects of people all wanting their pet problems solved at

the same time. Overall the Code has been effective. It has only

been in effect for nine years. To decide to make major changes

at this point may be premature.

Finding 11: A Stronger Enforcement Proqram May be

Needed.

The Department agrees that a stronger enforcement pro-gram

may be needed. Through review of available reports and

documents, follow- up on reported complaints about possible viola-tions,

and use of satellite photography generated by other enti-ties,

the Department has developed an enforcement program which

fully utilizes the time of its staff. The compliance and en-forcement

program has been successful in resolving hundreds of

suspected cases of violations each year since 1985. Moreover,

this program has been successful in establishing determinations

and resolutions of violations without resort to the court appel-late

process in all but a handful of instances.

Despite this success, there are indications that addi-tional

enforcement activities are desirable. Random field in-spections

and record audits would further insure widespread com-pliance

with the Groundwater Code. However, the Department now

lacks the staff to do these random checks at all, much less in

statistically significant numbers. Therefore, the Department has

requested additional funds for the operations and compliance

( enforcement) effort.

Finding 111: More Effort Is Needed To Protect The Pub-lic

From Hazardous O ~ e nWe lls

The Department agrees that more effort is needed to

ensure that open wells are capped. While the Department has

identified hundreds of open wells and- has adopted an emergency

rule to require owners to cap open wells, the Department lacks

the staff to enforce timely and complete compliance.

The Department would not support funding the additional

effort either from the enforcement fund or from a self- supporting

open well fund. The groundwater enforcement fund now supports a

full- time enforcement attorney. Penalties would have to be

raised to a publicly unacceptable level to finance additional

personnel from that fund, or from a self- supporting open well

fund. The Department has requested additional funds to staff the

effort which is needed. Finally, the Department agrees that it

would be desirable to require reports of open wells when water

rights are conveyed, and will work to implement that recomrnenda-tion.

Finding IV: Groundwater Withdrawal Fees.

The increase in the groundwater withdrawal fee to cover

half of the Department's administrative costs is one way to in-crease

taxes in light of tight budgets. Such an increase would

also provide an incentive for uses of alternative supplies of

water.

Finding V: Water Rights Claimants Should Support a

Greater Share of the Adjudication Costs

The Department disagrees that claimants will benefit

more than the general public from water rights adjudications.

Because the two general adjudications encompass almost all water

uses in Arizona except those supplied by the Colorado River,

nearly all of the general public is represented. Everybody uses

water, and individuals who did not file their own claims are

nevertheless generally represented by the claims made by their

water provider. For example, the City of Phoenix filed claims on

behalf of all those it serves. In fact the largest entities, who

represent the interests of many individual water users, are the

most active in the adjudications and have an acute interest in

bringing certainty to their rights in order to facilitate plan-ning

for increasing future needs.

The draft report implies that the only purpose for the

adjudications is to settle Indian claims. While that may have

been the primary motivation behind the petitions for adjudica-tion,

there are many instances of uncertain water rights and

conflicts among non- Indian water users which have needed resolu-tion

for many years. The fundamental benefit of the adjudica-tions

is certainty of water rights for both Indian and non- Indian

water users. Benefits accrue not only to the individual water

user, but also to the state as a whole because the determinations

made by the adjudications will be necessary in order to proceed

with meaningful water resources planning and management in

Arizona.

It is also stated in the draft report that the Depart-ment's

cost for administering the adjudications has increased

greatly in recent years. The costs have increased greatly since

1983 because that is the year that the U. S. Supreme Court's rul-ing

first made it certain that the adjudications would take

place. The Department has been spending a significant percentage

of its budgetary authority in building the Adjudications Division

to an adequate level since then, and, as the finding correctly

points out, the necessary staff level has not yet been at-tained.

The Department has always been aware of the relative

magnitude of the effort that the adjudications would impose on

the agency. What could not be anticipated were the specific

requirements which the courts have established for the Depart-ment's

technical assistance. These have been reached as a result

of litigation by the claimants.

Under the section " Precedents for ' User' Fees," there is

discussion relative to the Texas programs for collecting fees to

support a water master agency. That program and our current

program of adjudicating rights are not comparable. The current

Arizona statutes provide that the Director of the Department will

administer and enforce the final decree after the adjudication.

This effort, which may involve water masters, is several years in

the future. A fee to be assessed to water right holders for

administration, as determined in the decree, would make sense,

but it is premature to develop that type of program at this time.

The Snake River adjudication is cited as an example of

precedent for user fees. The primary impetus behind that adjudi-cation

is to determine the rights of utilities to use water for

hydroelectric power generation. A large percentage of the total

fees collected were from those utilities. In the Snake River

system, hydroelectric power generation revenues are substantial

and payment of large fees to determine their relative water

x ghts is feasible and justifiable. The Idaho fee schedule was

only slightly higher than Arizona's and was also a one- time

assessment. Idaho has a substantial amount of water and there-fore

collected a large amount of money. The Department is not

aware of any state that continues to collect fees from claimants

in the adjudication to support the litigation.

The United States, on behalf of its various agencies,

has paid approximately $ 318,000.00 in filing fees for both adju-dications.

These fees, however, were paid under protest and it

is the intention of the United States, as noted in each of their

claims, to seek recovery of all fees paid in Arizona at some

point during or after the proceedings. In the Snake River adju-dication

the United States has refused to pay the filing fee

unde