long-term storage credits; shortage; prohibition.

SB1201 - 572R - I Ver

REFERENCE TITLE:
long-term storage credits; shortage; prohibition.

State of Arizona

Senate

Fifty-seventh Legislature

Second Regular Session

2026

SB 1201

Introduced by

Senator
Shope

AN
ACT

amending sections 45-852.01, 45-854.01
and 48-3713.02, Arizona Revised Statutes; relating to Underground water
storage, savings and replenishment.

(TEXT OF BILL BEGINS ON NEXT PAGE)

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 45-852.01, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-852.01.

Long-term storage accounts

A. The director shall establish one long-term
storage account for each person holding long-term storage
credits. The director shall establish subaccounts within the long-term
storage account according to each active management area, irrigation non-expansion
area, groundwater basin or groundwater subbasin in which the person's stored
water is located.� The long-term storage account shall be further
subdivided by type of water, if the person holds long-term storage
credits for more than one type of water.

B. Water stored pursuant to a water storage permit
at a storage facility may be credited to a long-term storage account if
the director determines that all of the following apply:

1. Either:

(a) The water that was stored was water that cannot
reasonably be used directly.

(b) The water was stored in a groundwater savings
facility located in an active management area that does not have a management
goal of achieving or maintaining a safe yield condition, the water was stored
between January 1, 2020 and December 31, 2026 and the director determines that
the storage assists in implementing within this state a drought contingency
plan for the lower basin of the Colorado River.� The total maximum amount that
may qualify under this subdivision is fifteen thousand acre-feet per year.

2. If the stored water was stored at a storage
facility within an active management area, either:

(a) The water would not have been naturally
recharged within the active management area.

(b) If the water was stored at a managed underground
storage facility that has been designated as a facility that could add value to
a national park, national monument or state park and the water stored is
effluent, the water stored is water that could have been used or disposed of by
the storer by means other than discharging the effluent into the stream.

3. The stored water was not recovered on an annual
basis pursuant to section 45-851.01.

C. The director shall credit ninety-five
percent of the recoverable amount of stored water that meets the requirements
of subsection B of this section to the storer's long-term storage
account, except that:

1. If the water was stored at a managed underground
storage facility that does not qualify as an existing effluent managed
underground storage facility and that had not been designated at the time of
storage as a facility that could add value to a national park, national
monument or state park and the water stored is effluent, the director shall
credit to the storer's long-term storage account fifty percent of the
recoverable amount of water that meets the requirements of subsection B of this
section.� For storage of effluent in a managed underground storage facility
that is located in a recreational corridor channelization district established
pursuant to title 48, chapter 35, the director may increase the storage credits
earned from fifty percent to ninety-five percent if both of the following
apply:

(a) The effluent was not discharged into the stream
where the facility is located before the permit application for that facility
was filed.

(b) The director determines that the storage of
effluent in the facility will provide a greater benefit to aquifer conditions
in the active management area or, if outside an active management area, to the
groundwater basin than would accrue to the active management area or
groundwater basin if the effluent is used or disposed of in another manner.

2. If the water was stored at a groundwater savings
facility and the storer has not met the burden of proving that one hundred
percent of the in lieu water was used on a gallon-for-gallon
substitute basis for groundwater, the director shall credit to the storer's
long-term storage account only the percentage of the in lieu water that
meets the requirements of subsection B of this section and that was proven to
the director's satisfaction as being used on a gallon-for-gallon
substitute basis for groundwater.

3. The director shall credit to the storer's
long-term storage account ninety percent of the recoverable amount of the water
that meets the requirements of subsection B of this section if all of the
following apply:

(a) The stored water was central Arizona project
water that qualifies as water that cannot reasonably be used directly due
solely to the exclusion of groundwater withdrawn by the storer for mineral
extraction or metallurgical processing under section 45-802.01, paragraph
23, subdivision (c).

(b) The storer was engaged in mineral extraction and
metallurgical processing within an initial active management area on or before
January 1, 2011.

(c) All exterior boundaries of the storage facility
that is used to store the stored water are more than twenty miles from a well
owned by the storer on January 1, 2012 and that well is not an exempt well and
any one or more of the following apply:

(i) The well is an existing well as defined in
section 45-591, paragraph 1.

(ii) The department has issued a permit for the well
under section 45-599, subsection C.

(iii) The well was drilled pursuant to a mineral
extraction and metallurgical processing permit issued by the department under
section 45-514.

4. Except as otherwise provided in paragraph 2 of
this subsection, the director shall credit to the storer's long-term
storage account or conservation district account one hundred percent of the
recoverable amount of water that meets the requirements of subsection B of this
section if any of the following applies:

(a) The water stored was effluent that was stored at
a constructed underground storage facility, a groundwater savings facility or a
managed underground storage facility that was designated at the time of storage
as a facility that could add value to a national park, national monument or
state park.

(b) The water was stored in an active management
area and the stored water is water from outside the active management area that
would not have reached the active management area without the efforts of the
holder of the long-term storage credits.

(c) The water was stored outside an active
management area and the stored water is water from outside the groundwater
basin in which the water was stored that would not have reached the groundwater
basin without the efforts of the holder of the long-term storage credits.

(d) The water was stored for purposes of
establishing and maintaining a replenishment reserve pursuant to section 48-3772,
subsection E.

(e) The water was stored for replenishment purposes
pursuant to section 48-3771 and credited directly to a conservation
district account pursuant to section 45-859.01, subsection E.

5. If the storer is a municipal
provider, the director may not credit to the storer's long-term storage
account any stored water that is Colorado River water or central Arizona
project water and that is stored during a period of shortage on the Colorado
River, as declared by the United States secretary of the interior or the
commissioner of the bureau of reclamation.

D. The director shall credit a person's long-term
storage account by the amount of long-term storage credits assigned to
that person by another holder of long-term storage credits pursuant to
section 45-854.01.

E. The director shall debit the appropriate
subaccount of a person's long-term storage account:

1. One hundred percent of the amount of stored water
that the holder of the long-term storage credits has recovered during the
calendar year pursuant to the permit.

2. The amount of long-term storage credits
that the person has assigned to another person or transferred to a master
replenishment account, conservation district account or water district account.

3. If the water was stored in an active management
area, the amount of water during the calendar year that migrates to a location
outside the active management area or to a location within the active
management area where it cannot be beneficially used within a reasonable period
of time by persons other than the storer with rights to withdraw and use
groundwater.

4. If the water was stored outside of an active
management area, the amount of water during the calendar year that migrates to
a location outside the groundwater basin in which the storage facility is
located or to a location in the groundwater basin where it cannot be
beneficially used within a reasonable period of time by persons other than the
storer with rights to withdraw and use groundwater.

5. The amount of long-term storage credits
that the storer, pursuant to section 45-853.01, subsection B, has applied
to offset groundwater withdrawn or used in excess of the storer's per capita
municipal conservation requirements under the second management plan.

6. The amount of long-term storage credits
that are held by the Arizona water banking authority and that the authority has
chosen to extinguish.

F. To the extent the total amount of water withdrawn
by a person from wells designated as recovery wells pursuant to section 45-834.01
during a calendar year exceeds the amount of stored water recovered by the
person on an annual basis pursuant to section 45-851.01 and the amount of
long-term storage credits recovered by the person, the excess amount of
water recovered shall be considered groundwater withdrawn pursuant to chapter 2
of this title.
END_STATUTE

Sec. 2. Section 45-854.01, Arizona Revised
Statutes, is amended to read:

START_STATUTE
45-854.01.

Assignability of long-term storage credits

A. Except as provided in section

45-855.01,
subsection C, the holder of long-term storage credits may assign by grant,
gift, sale, lease or exchange all or part of the holder's long-term storage
credits.

B. Except as provided in subsection C

or D
of this section, an assignment of long-term storage credits from
one person to another is valid on receipt by the director of notification of
the assignment in writing on a form that is provided by the director and that
has been signed by both the assignor and assignee.

C. The director may reject and invalidate any
assignment of long-term storage credits in which the stored water would
not have met the requirements for long-term storage credits as prescribed by
section 45-852.01 if the assignee had stored the water.

D. The director shall reject and
invalidate any assignment of long-term storage credits that is
inconsistent with section 45-852.01, subsection C, paragraph 5.

END_STATUTE

Sec. 3. Section 48-3713.02, Arizona Revised Statutes, is amended to read:

START_STATUTE
48-3713.02.

Additional authority regarding water storage

A. The district may enter into a contract with
the
this
state, the Arizona water banking
authority, a county, a municipality or another person to develop, acquire,
construct, operate or maintain water storage, storage facilities and recovery
wells pursuant to title 45, chapter 3.1 on behalf of
the

this
state, the Arizona water banking authority, a county, a
municipality or any other person. With respect to such agreements or
contracts,
the
this
state, the
Arizona water banking authority, a county, a municipality or any other
persons

person
shall pay all costs
relating to such water storage, storage facilities and recovery wells,
including their proportional share of the costs that the district incurred
under section 48-3713.01.

B. The contract shall contain the further provision
that use of central Arizona project facilities for any purpose under this
section shall not interfere with deliveries to central Arizona project
subcontractors for direct use.

C. Any contract
that is
executed
by the district under this section with a central Arizona project subcontractor
shall contain the provision that in any year in which the amount of Colorado
River water available for delivery to central Arizona project subcontractors is
one million five hundred thousand acre-feet or less, central Arizona project
water
that is
allocated to the subcontractor to be used
for any water storage under this section will be limited to water
which
that
would otherwise not be delivered
for direct use to other central Arizona project subcontractors, except that
after December 31, 1993, central Arizona project water
that is

allocated to the subcontractor to be used for any water storage under this
section will be limited to water
which

that

would otherwise not be delivered for direct use to other central Arizona
project subcontractors serving water in the same active management
area.
Nothing in
This subsection
shall
be construed to

does not
affect the subcontract
rights of central Arizona project subcontractors.

D. The contract may include a provision to require
the district to pay to the county contributions in lieu of taxes on any
property, or interest in property,
that is
acquired under
this section. The amount of the contribution shall be determined
according to the procedures in title 42, chapter 15, article 6. If
the contract contains such a provision, the property, or interest in property,
that is
acquired under this section is deemed to be taxable
property in the county only for purposes of determining the county's levy limit
under section 42-17051 and the distribution of state transaction
privilege tax revenues to the counties under section 42-5029, subsection
D, paragraph 3, subdivision (a), item (i).

E. Notwithstanding any other law, a
municipal provider may not place an order with the district for the delivery of
central Arizona project water that the provider intends to store in an
underground storage facility pursuant to section 45-811.01 during a
period of shortage on the Colorado River, as declared by the united states
secretary of the interior or the commissioner of the bureau of reclamation.
END_STATUTE