Long-term sustainability of groundwater supplies in Arizona, particularly in the more densely populated areas of the state, is possible due in large part to the success of groundwater laws and regulations adopted under the Groundwater Management Act of 1980 (the "GMA"). However, with limited exceptions, the GMA largely left rural Arizona free from regulation of groundwater use and the drilling of wells. As groundwater-dependent rural communities have continued to grow, there has been increasing concern among residents and local governments about the long-term sustainability of their water supplies. In some cases, those concerns have translated into the acceptance of increased government oversight to manage those supplies.
Landowners and investors looking to develop water-dependent projects in rural Arizona would be wise to educate themselves on recent legal developments and trends towards increased groundwater regulations.
Arizona's Current Groundwater Management Paradigm: AMAs, INAs, and the Wild West
Groundwater use in Arizona increased rapidly following World War II as a result expanded electrification and improvements in well pumping technology. These developments untapped the vast volumes of groundwater stored in the state's aquifers to supply expanding municipal, agricultural, and industrial uses. At that time, groundwater use in Arizona was regulated under the common law doctrine of reasonable use, which places no limit on the volume of groundwater that may be withdrawn and used on the overlying property. Without any meaningful regulation of the volumes of groundwater that could be extracted, increased groundwater "mining" ultimately led to large declines in groundwater levels. This, in turn, resulted in increased pumping costs, decreased groundwater quality, and land subsidence issues, especially in the population and agricultural centers in central and southern Arizona.
The impacts of groundwater mining in the decades following World War II, concerns over legal limits on transporting groundwater away from the overlying land under the reasonable doctrine, and pressure from the federal government for Arizona to show that it would use Colorado River water delivered through the Central Arizona Project to offset certain groundwater uses, eventually led to the Arizona Legislature's enactment of the GMA in 1980. This landmark legislation provided the first comprehensive regulation of wells and groundwater use in Arizona and established a new state agency, the Arizona Department of Water Resources ("ADWR"), to implement and enforce those new legal requirements.
The primary groundwater use limitations under the GMA focused on two new types of groundwater management areas: Active Management Areas ("AMAs") and Irrigation Non-Expansion Areas ("INAs"). Within the newly designated AMAs, irrigation was restricted to lands that had been irrigated sometime in the five preceding years. In addition, the GMA prohibited groundwater withdrawal and use in AMAs except pursuant to "grandfathered rights" issued for existing uses, "service area rights" for water providers, or groundwater withdrawal permits that could be obtained from ADWR for certain specified uses. The GMA also imposed a requirement that developers of new subdivisions in AMAs prove a 100-year "Assured Water Supply" that was consistent with the management goal for the subject AMA (e.g., "Safe Yield" in the Phoenix AMA). In INAs, irrigation was likewise restricted to lands that had been irrigated in the five years preceding the GMA. However, other than the restriction on irrigation of new lands and a requirement to meter and report certain larger groundwater uses, INAs were not subject to the other groundwater use restrictions applicable to AMAs.
Outside of AMAs and INAs, the GMA did very little to regulate groundwater use. Although landowners were required to register existing wells and to file a notice with ADWR before drilling new wells, the GMA essentially codified the doctrine of reasonable use for areas outside of AMAs and INAs. As a result, well owners in those areas are not subject to any limits on the volume of groundwater that may be withdrawn for reasonable and beneficial use. Moreover, the GMA authorized groundwater to be transported and used away from the overlying land. Consequently, regulation of groundwater in rural Arizona outside of AMAs and INAs arguably became more relaxed under the GMA than before those laws were passed.
Recent Developments Affecting Rural Arizona Groundwater
Relaxed regulation of groundwater use outside of AMAs and INAs has been the norm in Arizona since the passage of the GMA. However, in recent years, driven by increased of agricultural water uses in certain areas of the state (e.g., the Willcox, Douglas, McMullen Valley, and Hualapai Valley groundwater basins), local governments and residents have become increasingly vocal regarding their concerns over the long-term sustainability of their groundwater supplies. In the examples discussed below, those concerns have translated into a new AMA and INA, as well as proposed legislation aimed at more restrictive regulation on groundwater in rural Arizona.
The Douglas Active Management Area
On August 30, 2022, in response to a petition from residents within the Douglas groundwater basin concerned over the long-term sustainability of groundwater supplies, the Cochise County Board of Supervisors called an election, held on November 8, 2022, on whether to designate that basin an AMA. The measure was approved by the voters, and the Douglas AMA was officially designated by the Director of ADWR on December 1, 2022. The Douglas AMA is the first AMA designated in Arizona since the passage of the GMA and the only AMA in Arizona established by voter initiative.
Fig. 1. Map of the Douglas AMA (ADWR, 2022)
a [Insert Fig. Image at https://www.azwater.gov/sites/default/files/2022-12/douglas-ama.pdf]
Because the election for the Douglas AMA was held within a very short timeframe, residents within the basin had to make a decision without the benefit of ADWR having time to analyze groundwater conditions and educate the public on the legal and practical impacts of designating the AMA. Following the AMA designation, ADWR conducted several stakeholder meetings to explain the impacts of the designation and obtain public input on development of a management goal and management plan for the AMA. Although these efforts by ADWR have been helpful, the fast pace of the designation, caught many landowners in the basin by surprise and has left them scrambling to determine whether their land is eligible for groundwater rights and whether they can move forward with development of their land of irrigation or other purposes.
For example, prior to being designated as an AMA, the Douglas basin was already regulated as an INA. Upon formation of the AMA, any INA "irrigation authority" rights were extinguished and the owners of those lands were placed in the position of having to apply for irrigation rights under the AMA statutes. Within the Douglas AMA, only land that (1) was irrigated in the 5 years before the call for the AMA election, or (2) is determined by ADWR to be the subject of "substantial capital investment" to start irrigation in the 12 months before the call for the election will be eligible for irrigation rights in the AMA. As a result of the AMA designation, many landowners may have lost their right to irrigate, as well as a substantial portion of their property value.
Under the AMA statutes, landowners in the Douglas AMA were given 15 months, or until March 1, 2024 to file applications with ADWR to obtain grandfathered groundwater rights. However, this timeframe proved to be too short for some landowners within the AMA, and earlier this year, the State Legislature extended that deadline until September 3, 2024. Landowners who fail to file an application by the new deadline will forfeit any claim to a grandfathered groundwater right for their property. The deadline for applications for grandfathered groundwater rights will be followed by a 180-day public notice and comment period and a subsequent substantive review period by ADWR. Accordingly, landowners in the Douglas AMA are unlikely to receive certificate of grandfathered groundwater rights until sometime between September and December 2025.
ADWR is currently going through the process of developing a management plan for the Douglas AMA. The management plan is a set of conservation rules for various classes of groundwater users within the AMA (e.g., municipal, agricultural, and industrial). While ADWR's official draft plan likely to be highly influenced by rules adopted in other AMAs, stakeholders will be given the opportunity comment on and shape the rules that will govern the Douglas AMA. ADWR has set a deadline of October 2024 for issuing a draft plan for a formal comment period ending in November 2024.
The Willcox Groundwater Basin
The Willcox groundwater basin is located just north of the Douglas Basin. As with the Douglas groundwater basin, the Willcox basin has seen a significant increase in agricultural activity in recent years, which, also like the Douglas basin, resulted in a petition to form an AMA being submitted to the Cochise County Board of Supervisors in the summer of 2022. The resulting measure to designate the Willcox basin as an AMA ultimately failed at the ballot box. However, the initiative provided a wakeup call for landowners and water users in the basin that increased groundwater regulation may be in their future.
Hualapai Valley Irrigation Non-Expansion Area
On December 19, 2022, the Director of ADWR issued a decision establishing the Hualapai Valley INA in Mohave County north of Kingman, Arizona. ADWR's designation of the Hualapai Valley INA followed requests from the Mohave County Board of Supervisors to ADWR in 2016, 2020 and 2022 to take action to form an INA. The public process to designate the INA was very abbreviated and limited to a public stakeholder and comment process commencing in September 2022 and ending in November 2022. Consequently, local landowners within the basin had very little time to prepare for the INA.
Fig. 2. Map of the Hualapai Valley INA (ADWR, 2022)
[Insert. Image at Hualapai Valley INA | Arizona Department of Water Resources (azwater.gov)]
As mentioned above, the primary groundwater limitation in an INA is the prohibition against bringing new land into irrigation. In order to irrigate land in the Hualapai Valley INA, the landowner must have irrigated the land or made a substantial capital investment to irrigate in one of the five years period to the ADWR Director's October 12, 2022 order initiating proceedings to establish the INA. Landowners in the Hualapai Valley INA claiming a right to irrigate under these two factors must file an application for "irrigation authority" with ADWR. As with the Douglas AMA, landowners that have only made a substantial capital investment and not yet irrigated, must wait for ADWR's approval on their application before irrigating their lands.
Unlike newly established AMAs, there is no statutory deadline for filing an application for a notice of irrigation authority within an INA. Unfortunately, there is also no statutory timeframe within which ADWR must review those applications. Accordingly, applicants for irrigation in the Hualapai Valley INA will need to be vigilant in following up with ADWR and ensuring that their applications are timely processed. This is particularly true for applicants that are filing for irrigation authority based on substantial capital investment that may not irrigate until their applications are approved.
The Proposed Gila Bend AMA
In February, ADWR held a public meeting to present information and accept comments regarding the possible designation of an AMA within the Gila Bend groundwater basin southwest of Phoenix metro area. ADWR's public presentation cited to land subsidence and groundwater declines as possible reasons for designation of AMA, but limited data was presented at the meeting.
Following the meeting, ADWR has received numerous comments in opposition to the AMA, with many stakeholders commenting that an AMA is the wrong tool for management of groundwater supplies in rural areas. Many of those commenters noted that the Arizona Legislature was considering a pending bill (Senate Bill 1221) that would provider for greater local control and regulation of groundwater resources. This bill is discussed in more detail below.
As of the date of this article, ADWR has not yet taken any further action on the proposed Gila Bend AMA. However, if the Director of ADWR does issue an order to initiate formal proceeding to initiate an AMA, the date of that order will operate as the cut-off date for irrigation of substantial capital investment for irrigation of new lands, as well as for initiation of other new non-irrigation water users. Landowners and investors working towards irrigation or non-irrigation projects in the Gila Bend AMA should keep that issue in mind as they evaluate timeframes for moving forward with their projects.
What is next and final thoughts
Senate Bill ("SB") 1221 was introduced this past legislative session with the goal of enacting an alternative groundwater management framework for rural Arizona that would incorporate elements of AMAs and INAs, but with more flexibility and more local input and control. SB 1221 would have established a process to designate "basin management areas" ("BMAs") and "active BMAs" in areas not already designated as AMAs. Although the SB 1221 did not become law, it garnered more support than similar bills considered in prior legislative sessions. This points to similar legislation not only being introduced, but passing, in the near future.
Groundwater is a finite and precious resources, and in many cases, the only source of water for many communities across Arizona. It is clear that Arizona is trending towards increased regulation of groundwater throughout the state, whether that be under current laws or newly adopted regulatory frameworks. Groundwater users and investors looking to develop projects in areas of Arizona outside AMAs with local groundwater concerns should keep this in mind as they consider timelines for capital investment and development of their projects. They should also closely monitor the Arizona Legislature in coming years so they are in a position to timely react to and prepare for proposal legal changes that would increase regulation of groundwater in rural Arizona.
Originally published July 25, 2024
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