The Regulatory Environment

Regulation of water and water rights, says real estate professional Linda Romer Todd, “gets very, very complicated.” The broker and water activist with Associated Brokers and Consultants, Grand Junction, Colo., is in a state where water supply has long been a challenge. But her observation holds true anywhere in the United States.

More than 20 federal agencies regulate different aspects of water, from drinking water quality to irrigation to flood control to endangered fish. The priorities of the Nuclear Security Administration may well conflict with those of the Environmental Protection Agency or U.S. Geological Survey. Factor in all the state and local regulations, and it’s a wonder that clean water comes out of the tap as often as it does.

The current situation of conflicting regulations covering the myriad uses of water and the widespread American expectation of cheap water on demand seem sure to collide. In Colorado, “some of the federal rules keep us from providing for local communities,” says Todd. “In the [federally designated] roadless wilderness areas, we’re precluded from building new storage areas. Everyone says we need to preserve [wilderness areas], but in high country it’s the only logical place to store water.”

The overarching framework recommended by the Environmental Protection Agency for water supply and quality is a watershed approach. This is a broader approach than the usual method of making decisions based on city, county, or state lines. Watershed management looks at water supply and quality, drainage, stormwater runoff, water rights, and overall planning for the human, plant, and animal communities served by a watershed. Land use decisions, such as how much permeable paving is permitted in developments within a watershed, are closely tied to watershed management.

Washington, D.C., for instance, is served by the Middle Potomac-Anacostia-Occoquan Watershed, and includes parts of Virginia, Maryland, and Washington (You can find your own watershed by typing your zip code into EPA’s website). Proper watershed management and protection require public and private entities in all three jurisdictions to work together across jurisdictional boundaries. Water doesn’t respect political boundaries, but state laws and county zoning regulations are sometimes written as if it could be corralled within jurisdictional lines. Cooperation among such disparate groups can be hard to achieve, but pays off down the road with a cleaner, more reliable water supply.

Wells: Not Always a Private Matter

To take just one regulated water issue, look at wells. The U.S. Environmental Protection Agency doesn’t regulate the quality of drinking water from private wells, but states may. In Massachusetts, for instance, local Boards of Health can regulate well location, construction, and water quality and quantity. The state Department of Environmental Protection makes recommendations to well owners on testing well water, including frequency and which chemicals to look for, but it has no regulatory authority. In some states, a locality may regulate how far a private well must be from a septic system, to ensure the safety of the well’s drinking water.

Sometimes real estate agents get caught in the middle. In some states, they may sell property to an individual who plans to drill a well to supply water to his own home, and the agent must explain about doing a well test and applying for a well permit.

On a larger scale, homeowners may find (again, depending on the state) that their drinking water supply is affected by the legal doctrine of “beneficial use.” That means different states give different priority to water used for domestic or municipal needs, farming, power, recreation, or other uses (see “Water Rights: A White Paper” (NRDS log-in required) for more information on individual states).

As with any kind of law, laws and regulations affecting water use may be used to advance a particular agenda, whether it’s to promote conservation, slow area growth, or another goal. Again, agents are in the middle, trying to comply with the regulations--and explain them to their clients--while selling homes or commercial property. Two examples, in Santa Fe and in Kittitas County, Wash., give a flavor of how water regulations and home sales can intersect.

Santa Fe’s Goal: No Net Increase in Water Use

Santa Fe’s water conservation program, started in response to several very dry years, has helped residents bring down their water use 42 percent from 1995 to 2009, to 98 gallons per capita per day. The average American uses 100 gallons a day, but Santa Fe’s water resource manager Dale Lyons looks at Europe’s 50-gallon-per-day average and sees a lot of room for improvement. He aims to keep lowering the city’s water usage by 5 percent a year.

The overall principle, started by San Luis Obispo, Calif., and adopted by other cities, is water demand offset. “We established a limit of the city’s water supply,” says Lyons. “If you want to take out water, you have to do conservation or buy water rights, so there’s no net increase in water use.”

That means developers who want to do new construction must buy water credits at a set amount per acre foot to offset the additional water use. The money goes into a pool that is used for consumer rebates for water-efficient appliances including toilets, washing machines, and dishwashers. That way, says the city’s water conservation manager Dan Ransom, builders help fund the rebate program.
But Kim Shanahan, executive director of the Santa Fe Area Home Builders Association, is worried that once the economy is strong enough for construction to come back, there won’t be enough water credits in the city-managed water bank for developers to offset their water use. Everyone agrees that most of the city’s toilets have already been retrofitted.

“What is the developer buying if no credits are coming to the system?” says Shanahan. “How will the developer be able to buy credits? If the city just shrugs its shoulder, that could create a moratorium on construction.”

Lyons doesn’t see this as a danger. The city offers a substantial $480 rebate for a front-loading washing machine, and “there’s continuing interest among consumers to buy water-efficient appliances.” If the city ran out of water credits for developers to buy, Lyons says, it would boost the rebate, and consumer interest would pick up.

For larger projects, developers must buy water rights from someone, perhaps elsewhere in the Santa Fe basin or along the Rio Grande, who has the rights to use water and no longer needs them. For instance, if a farmer’s children decide they no longer want to use the family property for farming, they can sell the water rights they have used for irrigation to a developer downstream who wants to supply water to new homes. Such transactions could become more common as property owners realize their land is more valuable for its water rights than for agriculture.

Once a water rights seller is found, the developer, like anyone who wants to use water in New Mexico, must apply for a permit from the State Engineer. That office must then “determine that the water is available, that the appropriation will not impair existing rights, that the intended use meets state water conservation efforts, and that the intended use is not detrimental to the public welfare.” (Quotation is from website of the Office of the State Engineer.)

Developer James Siebert of Siebert Associates in Santa Fe prefers to use water credits for new construction for his clients because buying credits from the city-run water bank is faster and less expensive than buying water rights, which take about a year to obtain. But the regulations require builders to use water rights if their project is over 10 acre-feet.

Whether Siebert uses water credits or water rights, their cost raises the cost of development. But “it’s passed on in the purchase,” he says. “Consumers are probably not even aware of it.”

Santa Fe clearly uses its requirements for new development as a means of water conservation. Perhaps, with the program’s recent expansion to include other appliances besides toilets and the willingness of the coordinator to tweak the program as necessary, all parties will be happy. The answer won’t be clear until construction starts again. But all alternatives are worth exploring in a drought-stricken area that expects continued growth.

Kittitas County’s Water Rights Moratorium

Like Santa Fe, small Kittitas County, Wash., 90 minutes from the Seattle metro area, is aiming for no net increase in water use. But it’s trying to get there in a more drastic way, with a water rights moratorium imposed by the state.

In July 2009, the state Department of Ecology issued an emergency rule that stopped new groundwater withdrawals in Upper Kittitas County unless they were backed by senior water rights. (That means an individual or group had previously established rights to the water under the rule of prior appropriation. See “Water Rights” (NRDS required) for more information.) That in effect meant a moratorium on drilling new wells. The state said the water used by new developments could hurt the water supply for irrigators downstream and the Yakama Nation, which both have senior water rights. Although Kittitas County is small, it had a building boom before the recession. In 2006 and 2007, it issued more building permits than neighboring Yakima County, which has a population six times as large.

In December 2010 the temporary rule was made permanent, at least until the U.S. Geological Survey completes a groundwater study in 2013. The Eastern Washington Growth Board brought a lawsuit, and arguments were heard in the state supreme court. A decision is expected in fall 2011.

Real estate brokers and builders aren’t happy. Real estate professional Kitty Wallace, Windermere Realty, Cle Elum, Wash., has many clients who can’t get water on their land. “I have retirees--this is their dream house. They buy land and pay it off, but they can’t build.”

Wallace advises her clients to seek legal advice. “That’s all I can tell them,” she says.

There are some areas, designated green zones, where water rights can be bought at $10,000 for 350 gallons of indoor domestic water use, says Wallace. But that means no yard or lot--and no fire protection, which is a must in that part of the country. Without fire protection, the owner can’t get insurance. And without insurance, no financing is available.

Wallace bought a parcel of land on which she intended to build a home and a well. But the moratorium sent the land’s value plunging from $200,000-plus to $5,000.

The country assessor’s office sent a notice to property owners affected by the moratorium saying they can petition for a reduction in the assessed value of their property. In four months, only 350 petitions were returned. “We’re somewhat surprised there aren’t more,” says county assessor Marsha Weyand. She expects more when the re-valuations are sent out.

She says her office is having a hard time assessing the effect of the moratorium. If a property’s value is down, “we don’t know whether it’s just the general market or because they have no water rights.” With the recession, there have been few property sales this year to use as a gauge.


For More Information

EPA links to water regulatory agencies in all 50 states

Santa Fe water offset program
Santa Fe water conservation program

New Mexico water rights

Upper Kittitas County water moratorium
Washington State Department of Ecology

Blog by real estate broker Kitty Wallace

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