In late votes, AZ lawmakers pass bills that would let developers take over farm water

Lawmakers approved a series of new water management measures on Saturday that could speed up farmland conversion in groundwater-regulated areas and transform the future growth of cities like Buckeye and Queen Creek.

The measures started in separate bills, were merged into a sweeping omnibus bill, then split again last week when it became clear the omnibus legislation didn't have the votes to pass as a package. All key provisions passed on Saturday before the session closed.

"We had some beneficial tweaks and they all went up as four separate bills," said Rep. Tim Dunn, who was at a point the lead of the omnibus bill, which proponents said could benefit both housing and water conservation in Arizona.

After the amendments, the result was still what sponsors hoped for, said Dunn, R-Yuma: "All of that stuff is going to be on the governor's desk."

Gov. Katie Hobbs, who said at the start of the session she wanted lawmakers to address the state's water issues, has not taken a position on any of the provisions headed her way.

The former omnibus bill, HB 2201, started with a single provision: to allow private utilities, not just cities, access to water in the Harquahala Valley west of Phoenix and sell it to cities elsewhere. It would also allow public and private entities in La Paz county to use that water for themselves, lease it, or sell it.

Then lawmakers combined the proposal with three other bills, and eventually tacked on assured water supply provisions, rules about wildcat subdivisions, replenishment obligations, provisions regarding water credits, revised turf regulations, and the transfer of agricultural water rights to deliver "comprehensive water savings" and increase housing across the Phoenix and Pinal Active Management Areas, Dunn said. Then they all split again.

In the end, four measures passed with amendments: Senate Bill 1181, SB 1172 and SB 1081. The Harquahala provisions passed in SB 1242.

Concerns over provisions on agriculture-to-urban water transfers in SB 1172 held up negotiations on the package. Lawmakers approved three key amendments at the last minute.

Tribes and some water experts raised questions about whether the proposed measures could deliver on the water savings sponsors promise, suggesting some provisions could even harm groundwater supplies in the Pinal Active Management Area. The Arizona Department of Water Resources recognized these risks and is preparing a detailed report.

The agency is expected to present that data Tuesday to the Governor's Water Policy Council, Dunn said. He is confident it will show the proposed bill helps the aquifer.

"Our studies show it does, the department has advised the governor that it does," he said. "And when they get that data — hopefully they'll be presenting it tomorrow at the water council — it will show that we got a bill that can be signed."

SB 1172 also requires applicants of building permits and subdivisions to identify ownership interests, limits what constitutes "unlawful practices" in subdivision laws and establishes a maximum penalty of $2,000 for them.

It also bans municipal providers from using potable water on nonfunctional turf in new developments or redeveloped areas within AMAs.

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Debating ag-to-urban water rights transfers

One of the provisions watched most closely was in SB 1172, which would allow developers to build within Active Management Areas using groundwater from farmland.

That change in the law is of great interest to developers, who currently are banned from building in areas of Maricopa, Pinal and Pima counties if they are tapping the aquifer.

An updated model from the Water Resources Department showed new development in the Phoenix and Pinal AMAs couldn't rely on the aquifers anymore because dwindling groundwater wouldn't meet the demand. Hobbs paused new construction in areas like Buckeye last year unless developers could find other water sources for their 100-year assured water supply.

The newly passed bill would turn that around by offering farmland's groundwater rights.

It would convert more land from agriculture, which requires about 4 acre-feet of water across AMAs, to development, which, under earlier versions of the bill, were allowed a use of 2 acre-feet a year for that same ground for 10 years. Proponents estimated groundwater savings could be anywhere between 38,000 to 171,000 acre-feet every year, depending on the AMA.

"It's gonna be good for the aquifers," said private water lawyer Alexandra Arboleda, who helped draft the bill and represents some developers. "You are going to see replenishment of the pumping and reduced pumping and new effluent supplies."

But in the Pinal AMA, the basin is already overpumped and farmers aren't even planting all their acreage. They relied mostly on Colorado River water from the 1980s to 2022. After their allocations were cut, they fully turned to groundwater again.

The Gila River Indian Community relies on that same groundwater supply and said in a statement that the tribe's technical analysis shows the current bill could "actually harm groundwater supplies, not restore them," in the Pinal AMA.

The tribe, with 372,000 acres of land in central Arizona, is a prominent leader in water conservation deals. The tribe wasn't included in early negotiations and didn't learn of the proposed legislation until February, said a tribal spokesperson.

The tribe's concerns were confirmed by Arizona Department of Water Resources last week in a stakeholder meeting. Based on early estimates, the Pinal AMA would see more groundwater depletion, not less, under SB 1172. That conclusion considers the rate of growth of urban development and estimates of 100 years of water use.

The Phoenix AMA would see some water savings, the water agency found. The Arizona Department of Water Resources remained a neutral position on the proposed legislation.

Three key amendments passed on Saturday to address these concerns, Dunn said.

In the original bill, only land that used its grandfathered water rights for one of the last five years could be eligible for the ag-to-urban transfers. That time frame would now be determined by the Water Department director, Dunn explained.

Second, water rights transferred to development could only be used within a one-mile radius, not more. And developers wouldn't get a flat allotment of 2 acre-feet of water a year for the transfer. Some farmland already gets 2 acre-feet, so the transfer would also adjust under it.

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Replenishment duty is still not in the equation

Significant water savings were left out of those ag-to-urban estimates, according to Arboleda and Dunn.

To get their certificate of assured water supply as required by the state's Groundwater Management Act, developers would obtain a "physical availability credit" from farmland and pay fees to replenish 100% of the groundwater pumped, said Arboleda, who sits on the Central Arizona Water Conservation District Board of Directors, overseeing replenishment. The developers would also produce and recycle effluent.

Irrigating crops, specifically through flooding or furrows, leads to some "incidental recharge," where water makes it back to the aquifer. But farmland has no replenishment duty.

Kathy Ferris, a former Water Department director and a longtime water lawyer, is skeptical that the replenishment district could actually meet the demand from developers.

Under SB 1172, the Central Arizona Groundwater Replenishment District could have the obligation to replenish each year an additional 240,000 acre-feet, by some estimates. That accounts only for projected Phoenix AMA ag-to-urban transfers, according to Ferris.

The district is already "overburdened," she added. It also relies almost exclusively on Central Arizona Project water to fill replenishment demands. The CAP, which delivers water from the Colorado River, is expected to face continued cuts, and there are no "guardrails" if they cannot fulfill the replenishment obligations they are paid to do.

Arboleda, with CAP, recognized there is less Colorado River water for both replenishment and agriculture, but said the replenishment district is aware and "planning for it."

The ag-to-urban transition "will likely be gradual," she added.

What about farmland loss?

A transfer of agricultural water rights to subdivisions would drive developers to new areas. But urban sprawl is already occurring.

"I am a farmer. I don't want to stop agriculture," Dunn said. But the bill could allow a transition near urban areas, which reduces water use, "instead of forcing them to continue to farm."

That provision would give farmers and ranchers better opportunities, said Chad Smith, Arizona Farm Bureau's director of government relations. While the bureau took no formal position on the bill, it is supportive of measures that provide "flexibility for farmers and ranchers within those AMAs," he added.

There are many pressures pushing some farmers to plant fewer acres or seek selling opportunities.

When the Pinal AMA lost virtually all Colorado River water allocations, farmers didn't lose their right to pump groundwater. Even so, access continues to be a problem. Irrigation districts have invested heavily on upgrading and drilling new wells and building pipelines, but the benefits to farmers aren't even.

The change from surface water to groundwater also created new costs like investments for additional wells, more efficient irrigation systems and the energy costs for pumping.

"The margins are thin," Dunn said. An ag-to-urban provision would help some make money off their land, create a "pathway to growth," and help the aquifer, which could in turn also help those who remain farming, he said.

"These things are not necessarily going to drive farmers out," he said.

Clara Migoya covers agriculture and water issues for The Arizona Republic and azcentral. Send tips or questions to clara.migoya@arizonarepublic.com.

This article originally appeared on Arizona Republic: AZ bill would let developers tap agricultural water for new housing