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F I S C A L I M P A C T R E P O R T

SPONSOR SFC

DATE TYPED 3/4/05

HB

SHORT TITLE Strategic Water Reserve

SB 123/SFCS

ANALYST Aguilar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

Indeterminate Recurring State Engineer

Operating Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 195

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Indeterminate Recurring State Engineer Op-

erating Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of the State Engineer (OSE)

New Mexico Environment Department (NMED)

New Mexico Department of Agriculture (NMDA)

New Mexico Finance Authority (NMFA)

SUMMARY

Synopsis of Bill

The Senate Finance Committee substitute for Senate Bill 123 establishes the Strategic Water Re-

serve (SWR) and provides for the purchase, lease or donation of surface water or water rights or

storage rights to make up the reserve. Underground water and water rights could also be ac-

Senate Bill 123/SFCS -- Page 2

quired in a similar manner to implement a cessation of pumping or for limited stream augmenta-

tion.

The committee substitute also provides for collaborative management of water when appropriate

processes are in place and with a number of governmental entities. Authority vested in these en-

tities cannot be repealed or modified by provision of this legislation.

Significant Issues

The ISC shall develop river reach or ground water basin priorities for the acquisition of the wa-

ter, water rights or storage. For each priority reach or ground water basin, the ISC shall coordi-

nate with Indian tribes and pueblos, boards of county commissioners, special districts, soil and

water conservation districts, water authorities, and water planning regions to do additional priori-

tization.

The commission may not acquire water rights for the SWR that are served by an acequia or

community ditch. The ISC shall acquire water rights that have sufficient seniority and consis-

tent, historic, beneficial use, and cannot acquire rights for the SWR through condemnation. Stra-

tegic river reserve water rights will not be subject to forfeiture for non use.

Water or water rights acquired under the provisions of this bill must remain in the river reach or

ground basin of origin.

ISC may lease water at market value and the proceeds of the leases are appropriated to the ISC to

carry out the purposes of the SWR. The ISC may sell water rights that are no longer necessary

for the strategic water reserve, but water rights may not be sold to the United States and the first

offer of sale shall be for its original purpose of use. Proceeds from the sale of water are appro-

priated to the State Engineer to adjudicate water rights.

The Environment Department notes a strategic water reserve will allow the state to more effec-

tively manage its limited water supplies and interstate stream compact obligations. However, the

uses of the strategic water reserve are limited and should be expanded to prevent impacts to wa-

ter quality and aquatic ecosystems caused by reductions in water quantity.

The Department of Agriculture notes the State Engineer does not have a plan in place for the

management of lands where water rights are purchased or leased.

PERFORMANCE IMPLICATIONS

This bill seeks to implement an action item in the New Mexico State Water Plan.

Provisions contained in this bill may assist the state meet its stream obligations.

FISCAL IMPLICATIONS

Revenue generating opportunities as a result of provisions contained in this legislation are sig-

nificant however specific amounts are difficult to estimate at this time.

The committee substitute appropriates funds to the Office of the State Engineer and the Interstate

Senate Bill 123/SFCS -- Page 3

Stream Commission. The appropriations contained in this bill do not direct funds to a particular

fund. The assumption is they would be directed to the state engineer operating fund. Reversion

language regarding these appropriations is not included in the bill.

The bill provides for continuing appropriations. The LFC objects to including continuing appro-

priation language in statutory provisions. Earmarking reduces the ability of the legislature to es-

tablish spending priorities.

ADMINISTRATIVE IMPLICATIONS

The Interstate Stream Commission notes the bill directs the development of rules for implemen-

tation. Staff will be needed to manage the funding, identify and purchase the water rights, pro-

vide for public involvement, and implement the policy and manage the reserve

TECHNICAL ISSUES

The State Engineer’s office suggested a new fund be established to receive funds generated from

sales, leases and other sources of revenue.

OTHER SUBSTANTIVE ISSUES

The Environment Department reports water quality impairments due to low flow caused by

drought conditions can have a detrimental impact on aquatic ecosystems. These impairments can

reduce habitat and lead to reductions in populations of aquatic species, and could ultimately re-

sult in additional threatened or endangered species in New Mexico. The strategic water reserve

should be available to mitigate low flow impacts to water quality and aquatic ecosystems.

PA/lg