The future of Washington’s water banks | K&L Gates LLP



Water banks, which have long been used in east Washington to collect and transfer water rights, are emerging as a useful way to assign water rights in west Washington. But water banks can also be subject to significant changes due to new legal requirements. Although the Washington State Department of Ecology (Ecology) announces additional water banks in new areas of the state, the 2021-2022 draft budget includes new requirements that raise the bar for the creation of water banks and the transfer of water rights through them. While more funding has been allocated to facilitate the creation of water banks, lawmakers have also directed Ecology to take a closer look at the individuals and communities served by private water banks. Water bank builders and buyers could face additional regulatory burdens and should watch closely as Ecology goes through what this new mandate means for water banks in the state.

Water Banking – Basic Overview

Water banks are a regulatory instrument to protect water rights or to change their place and purpose of use. In general, a water bank provides a mechanism whereby a water rights holder can “deposit” a water right with a public or private entity (the bank) that can make the water rights available to another person or use it at a downstream location. The transactions can be either permanent or temporary. The concept of water banks is that facilitating the buying and selling of water rights through a free market system can help meet water needs and lead to a more efficient distribution of water resources.

In Washington, private water banks must be created in consultation with Ecology. The would-be banker and Ecology identify a water right to mitigate usage and the needs that the bank would meet. Water banks naturally serve a specific group of customers, e.g. B. those that are downstream of the original diversion point, and sometimes certain functions, such as the regulation of interruptible irrigation rights. Once identified, Ecology and the banker negotiate a water rights trust, which is governed by Ecology’s Trust Water Rights Programto define the operation and expectations of the waterfront. The ecology evaluates the validity of the water law or the water rights via a test report (ROE), which is generally made available for public inspection and comment. After acceptance and approval of the ROE, Ecology will issue an order to change the purpose of the water law, identify the amount of water available for reduction and make the change publicly known. Once all public comments have been considered, Ecology will execute the escrow arrangement with the original water rights holder. If the water right is to mitigate permanent new uses, it is transferred to ecology. Ecology then issues a water trust certificate and publishes a statement of fees, unit price and available water supply on the Ecology website. As soon as the bank is operational (and sometimes simultaneously with the establishment of the bank), the water seekers apply to Ecology for a permit for a reduction, which is offset by the bank. These permits can be used to improve the course of the stream, to ensure more even irrigation or to enable increased urban use.

Success in water banking

Water banks are successful across east Washington, with several banks operating in the drainage areas of the Yakima, Columbia, and Walla Walla rivers. These banks have enabled a variety of exchanges, including the Walla Walla Exempt Well Mitigation Bank, the Lake Roosevelt and Sullivan Lake Exchange in the Columbia River Basin, and the Darling Water, LLC Exchange in the Yakima River Basin.

Ecology maintains a spreadsheet for tracking water banks that shows the source of mitigation rights, available credit, fees and charges, and geographic extent of suitability (i.e. coverage area).

Banks, while not a new concept, are a relatively new phenomenon west of the Cascades. One of the first water banks built in West Washington was the Dungeness Water Exchange. It was created in 2013 by Clallam County, Ecology, the Dungeness Water Users Association, the Jamestown S’Klallam Tribe, City of Sequim, Clallam Public Utility District No.1, Clallam Conservation District, Washington Department of Fish and Wildlife, and Washington Water Trust as Responding to government regulations restricting new water uses in the Dungeness Water Rule Area. The bank helps protect the Dungeness River while providing water for new uses such as homes and businesses.1

The Skagit River Basin Mitigation Program, based on an ecology purchase of water rights from Seattle City Light, was announced in late March this year. It provides landowners with parcels located in an area designated as a Mitigation Zone with a limited amount of mitigation water based on modeled groundwater interactions with the surface water of the Skagit River, where the abatement water from Seattle City Light is released. The water purchased from Seattle City Light will be used to offset the effects of certain new domestic groundwater uses on the Skagit River.

Change of public opinion and legislative proposals

Inspired by concerns that water banks are consolidating a public resource for private use,2 Washington State Legislature considered law last year that would have fundamentally changed the state’s Trust Water regime.3 HB 1385 would have banned the downstream transfer of water rights in seven Water Resource Inventory Areas in east Washington. Although this legislation has been weakened in a study group, the opinion remains among some stakeholders that water banks are potentially harmful.

Entry into the 2021 legislative period, in which the final operating budget contained several provisions related to water banking. On the positive side, the budget provides $ 9,000,000 in funds for ecology “to manage” [a] Pilot Water Banking Strategies Grant Program to meet the water needs described in this section. “4th The needs determined by the legislator include agricultural use and the inflows for fish and wild animals. The water bank must also receive water rights for use in the country of origin and for permanent inflows for fish and wild animals through the primary and secondary water rights. There are a number of restrictions on these grants, including that grants (1) must be limited to $ 2,000,000 or less per applicant; (2) may only be used for the development of water banks in rural counties that have source areas of a larger watershed within their borders, and only for water bank strategies within the country of origin; (3) One third of all water rights acquired with these funds must be permanently changed to instream rights in favor of fish and wild animals; (4) water banks must serve a local public benefit; and (5) the applicant must be a public entity or a participant in a public-private partnership with a public entity.

The hardest part of this package, at least when it comes to water banking, is funding the ecology to “[d]Develop recommendations and implement measures within the existing powers to change the process for reviewing water banks to ensure that important information is made available to the public. “5 The bill instructs Ecology to consider whether certain qualifying information is required as part of a water bank application package. This information may include an overview of the needs and customers the bank will serve, the geographic area to be served, available mitigation rights, changes in mitigation rights, restrictions the bank may wish to impose, and “anything else the department may need considered to promote ”. Transparency and the public interest. ”The budget also suggests that ecology consider imposing reporting requirements on water banks when implementing changes to customers or water banks’ needs.

Ecology must also examine whether such changes should trigger a public comment period. While each potential water bank would likely take its own diligence to determine if and where to market its water rights, the potential addition of these additional application requirements poses another regulatory hurdle for water banks, as well as an additional burden on ecology for review and approval .

Finally, the funding package includes an instruction for ecology to “refine” its recommendations for improving the Washington framework for water banking, water trusts, and water rights transfers. The mandate also requires Ecology to address issues related to private investment in water banks and the benefits of incentives and regulations related to the transfer of water rights outside of the river basin.6th

Possible effects

Water banks have been an important tool in reallocating public resources as Washington’s economy developed. Your utility stands at an interesting crossroads. On the one hand, they have temporary workers who devote themselves to their assessment and moderation, as well as established regulations and company standards. On the other hand, due to their increasing importance, they are at the center of a public debate about the highest and best use of a public natural resource.

Stakeholders are encouraged to follow this issue closely in order to understand and participate in the discussion and possible future legislation. Interested parties should discuss with Ecology how the implementation of the new funding requirements and the new framework conditions for the allocation of funds as well as the assessment of water markets in general can best be managed.

1 See About us, water exchange Dungeness.

2 See Evan Bush, Wall Street Spends Millions to Buy Washington State Water, THE SEATTLE TIMES (October 27, 2019, 6:00 a.m.).

3 See HB 1385 (2021-22), Limiting the Transfer of Water Rights from Their Original Water Resource Inventory Area, available Here.

4th Laws of 2021, chap. 334, § 302 (32), available Here.

5 Laws of 2021, chap. 334, § 302 (31) (a).

6th Laws of 2021, chap. 334, § 302 (31) (b).



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