Tuesday, December 21, 2010

2011 Legislature: Water Law Modifications

Senator Margaret Dayton has introduced a bill to make some changes to Utah Code section 73-3-17. The bill has been numbered Senate Bill 26 (S.B. 26) and is entitled "Water Law Modifications."

Most of the proposed changes in the bill are small, technical changes. The most significant change relates to certificates of beneficial use (aka certificates of appropriation) that are issued by the State Engineer. Currently, the law requires the water right owner to record the certificate with the appropriate county recorder's office within 30 days after the certificate has been issued. This bill removes the recording requirement, but provides that a water right owner may record the certificate if he/she wants to.

To read the full text of the bill, click here.

(For an update on this bill, click here.)

Friday, December 17, 2010

What Is the Process for Approval of a Change Application or Application to Appropriate?

After a Change Application or Application to Appropriate has been filed with the Utah Division of Water Rights, there is a process that the application must go through before it is approved or denied.

The application must first be advertised once a week for two successive weeks in a newspaper of general circulation in the county. Advertising may not be required on a temporary change application or on an application on a small amount of water (defined as the amount of water necessary for one residence, 0.25 acres of irrigation, and stockwater for ten ELUs).

Interested parties may file a protest with the State Engineer. The protest period is for twenty days following the advertisement. A hearing may held if a protestant requests a hearing or if the Division of Water Rights has other reasons or concerns for holding a hearing.

Following the hearing (or following the protest period, if no hearing is required), the Division will review all of the information before it, including the application, the protests, the information obtained at the hearing, and other data on file with the Division. The Division may also conduct a field investigation or request additional information from the applicant.

The State Engineer will then issue an order either approving or rejecting the application. The order will also generally contain limitations and conditions of approval. There is no real timeline for when the order will be issued. Generally, it takes six to eight weeks from the date of the hearing, but on more complex applications, it may take several months or even years for an order to be issued.

If a party disagrees with the State Engineer's order, he/she can file a request reconsideration within twenty days from the date the order is issued. The State Engineer may grant the request for reconsideration and issue an amended order. The State Engineer may also deny the request for reconsideration, either by expressly denying the request or by not taking any action on the request for twenty days after the request is filed (at which point the request is deemed denied). The aggrieved party then has thirty days to appeal to the district court.

For a flow chart of the application process, click here.

To read the statutes about the application process, click here.

Wednesday, December 8, 2010

Introduction to Wetland Laws and Regulations

The following article was written for the Water & The Law newsletter that our firm publishes on a quarterly basis. If you would like to receive an email version of the newsletter, please click here to join our mailing list.

Even though Utah is the second-driest state in the nation, wetlands issues frequently arise in many different situations, including land development, mining and mineral extraction, agriculture, and stream alteration. The Clean Water Act (CWA) was enacted in 1972 "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters," i.e. to make the nation's waters fishable and swimmable. The CWA seeks to do this by preventing future contamination and pollution of waters. The central feature of the CWA is section 301, which prohibits the discharge of any pollutant into a navigable water, including wetlands, unless otherwise authorized by a permit. One of the most common permits issued under the CWA is a section 404 wetlands permit issued by the Army Corps of Engineers (Corps) for certain discharges of "dredged or fill material" into wetlands.

In determining whether a wetlands permit is required for a particular project, it must first be determined whether the area that will be impacted by a proposed activity is within the Corps' regulatory jurisdiction under the CWA. Waters within the Corps' jurisdiction include navigable waters; tributaries to navigable waters; interstate wetlands; wetlands that could affect interstate or foreign commerce; and wetlands "adjacent" to any of the above. Wetlands are determined based on the presence of three elements: soils, hydrology, and vegetation. The physical boundaries of a wetland are determined by a "delineation" conducted by either the Corps or a licensed professional.

The U.S. Supreme Court recently muddied the waters regarding the extent of the Corps' jurisdiction over wetlands not immediately adjacent to traditionally navigable waters. See Rapanos v. United States, 547 U.S. 715 (2006). In a divided opinion, the Court established two different standards for determining jurisdiction, neither of which has gained traction as the official test.

Second, the proposed activity must also be within the Corps' regulatory jurisdiction under the CWA for a permit to be required. Section 404 prohibits the "discharge of dredged or fill material into the navigable waters" except upon issuance of a permit. Certain activities that otherwise constitute a "discharge of dredged or fill material" are exempted from regulation. Projects should be analyzed to see if they qualify for an exemption.

If both the area and the activity are within the Corps' section 404 regulatory jurisdiction, any activity that impacts the wetland must obtain a permit from the Corps. General Permits are issued for regulated discharges with minimal adverse effects, while individual permits are required for potentially significant impacts to wetlands. The individual permit process is more involved, requiring compliance with criteria established in the EPA's 404(b)(1) Guidelines. An individual permit may also be denied if it "would be contrary to the public interest."

Under either type of permit, if impacts to a wetland are unavoidable, the permittee must attempt to minimize the impacts in the design of the project. If impacts to the wetlands remain after minimization, the permittee must provide compensatory mitigation, which primarily involves restoration, enhancement, creation, and preservation of other wetlands. The Corps now approves of, and in fact prefers, mitigation banking and in-lieu-fee mitigation as alternatives to traditional compensatory mitigation. With proper planning many difficulties in dealing with wetlands issues can be prevented.

Click here for a more detailed article regarding wetlands regulations.

How Does the Law Treat Lost Share Certificates in Water Companies?

The following article was published in the Water & The Law newsletter, which our firm publishes on a quarterly basis. If you would like to receive an email version of the newsletter, please click here to join our mailing list.

When the pioneers settled Utah in the 1800s, they often banded together to construct common water diversion, storage, and distribution facilities. Over time, these associations of water users were incorporated into nonprofit mutual water corporations. In these companies, the water rights are held in the name of the corporation for the benefit of its members. Shares of stock were issued to signify how much water each individual is entitled to receive. In most cases, to transfer the shares of stock, the shareholder would need to endorse the certificate to a new owner. Thus, the certificate was critical to establish and transfer ownership of the shares and the attendant right to water delivery.

This system works well in most cases, but it presents a challenge whenever a certificate is lost, destroyed, or stolen. Under the Uniform Commercial Code, a portion of which is applicable to transfers of shares of stock in a water corporation, the corporation cannot simply re-issue the share with impunity. If the lost or stolen certificate is later discovered, the corporation would usually need to honor both the replacement certificate and the original. Because shares of a water corporation represent a right to delivery of a proportionate share of the corporation's water rights, dilution of the shares in this manner is especially unpalatable to the other shareholders. To account for these risks, many water corporations have a series of requirements before they will issue a replacement certificate. For example, many corporations require the person requesting a new certificate to post or obtain a perpetual bond to protect the corporation in the event the original certificate surfaced. Recently, however, it has become more and more difficult to secure such a bond.

To address this difficulty, the Utah Executive Water Task Force has recently approved a draft bill in an attempt to streamline this process. The bill is expected to be presented to the 2011 Utah State Legislature for consideration. The present draft of the bill continues to give the corporation the ability to establish its own requirements for issuing a new certificate in its Articles of Incorporation or Bylaws. Without such requirements, however, the new law would provide some options for the water corporation to both protect itself and allow a new share to be issued. For example, the proposed bill would give the water corporation the option to, at the expense of the person requesting the new certificate, publish and mail notice of the request to issue a replacement certificate. The bill then outlines a process that the corporation can use to resolve share ownership disputes. There will undoubtedly be further revisions of the bill before it is passed, but it is a step toward solving this challenge that often faces water corporations and shareholders.

(Update: Click here to read about the bill introduced in the 2011 Utah Legislature.)