Existing law declares that the diversion or use of water, other than as authorized by specified provisions of law, is a trespass. Existing law authorizes the executive director of the State Water Resources Control Board to issue a complaint to a person who violates certain use and diversion of water provisions and subjects the violator to administrative civil liability. Existing law authorizes the board to adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing, unless a written request for a hearing signed by, or on behalf of, the party served with the complaint is delivered to or received by mail by the board within 20 days after receipt of the complaint.

This bill, commencing July 1, 2018, would establish a Water Rights Division within the Office of Administrative Hearings, as prescribed. The bill would require a hearing to set the above-described administrative civil liability to be held before the division in accordance with the Administrative Procedure Act. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the board, as prescribed. The bill would authorize an appeal of the boards decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court. The bill would add expenditures of the division to the purposes for which the moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

Existing law authorizes the board to issue an order to a person to cease and desist from violating, or threatening to violate, certain requirements relating to water use, including diverting or using water, other than as authorized.

This bill, commencing July 1, 2018, would authorize the board to issue a complaint seeking an order, instead of directly issuing the order, requiring a person to cease and desist from diverting or using water, other than as authorized, and would make conforming changes. The bill would require that the complaint be served by personal notice or certified mail and inform the person that the person may request a hearing conducted by the Water Rights Division of the Office of Administrative Hearings. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the board, as prescribed. Following the boards acceptance, modification, or rejection of the recommendation, the bill would authorize the board to issue a cease and desist order. The bill would authorize an appeal of the boards decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court.

Existing law declares that the diversion or use of water, other than as authorized by specified provisions of law, is a trespass. Existing law authorizes the executive director of the State Water Resources Control Board to issue a complaint to a person who violates certain use and diversion of water provisions and subjects the violator to administrative civil liability. Existing law authorizes the board to adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing, unless a written request for a hearing signed by, or on behalf of, the party served with the complaint is delivered to or received by mail by the board within 20 days after receipt of the complaint.

This bill, commencing July 1, 2018, would establish a Water Rights Division within the Office of Administrative Hearings, as prescribed. The bill would require a hearing to set the above-described administrative civil liability to be held before the division in accordance with the Administrative Procedure Act. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the board, as prescribed. The bill would authorize an appeal of the boards decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court. The bill would add expenditures of the division to the purposes for which the moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

Existing law authorizes the board to issue an order to a person to cease and desist from violating, or threatening to violate, certain requirements relating to water use, including diverting or using water, other than as authorized.

This bill, commencing July 1, 2018, would authorize the board to issue a complaint seeking an order, instead of directly issuing the order, requiring a person to cease and desist from diverting or using water, other than as authorized, and would make conforming changes. The bill would require that the complaint be served by personal notice or certified mail and inform the person that the person may request a hearing conducted by the Water Rights Division of the Office of Administrative Hearings. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the board, as prescribed. Following the boards acceptance, modification, or rejection of the recommendation, the bill would authorize the board to issue a cease and desist order. The bill would authorize an appeal of the boards decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court.

Existing law declares that the diversion or use of water water, other than as authorized by specified provisions of law law, is a trespass. Existing law authorizes the executive director of the State Water Resources Control Board to issue a complaint to a person who violates certain use and diversion of water provisions and subjects the violator to administrative civil liability. Existing law authorizes the board to adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing, unless a written request for a hearing signed by, or on behalf of, the party served with the complaint is delivered to or received by mail by the board within 20 days after receipt of the complaint.

This bill, commencing July 1, 2018, would establish a Water Rights Division within the Office of Administrative Hearings, as prescribed. The bill would require a hearing to set the above-described administrative civil liability to be held before the division in accordance with the Administrative Procedure Act. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the executive director, board, as prescribed. The bill would authorize an appeal of the executive directors boards decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court. The bill would add expenditures of the division to the purposes for which the moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

Existing law declares that the diversion or use of water other than as authorized by specified provisions of law is a trespass. Existing law authorizes the executive director of the State Water Resources Control Board to issue a complaint to a person who violates certain use and diversion of water provisions and subjects the violator to administrative civil liability. Existing law authorizes the board to adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing, unless a written request for a hearing signed by, or on behalf of, the party served with the complaint is delivered to or received by mail by the board within 20 days after receipt of the complaint.

This bill bill, commencing July 1, 2018, would establish a Water Rights Division within the Office of Administrative Hearings, as prescribed. The bill would authorize the Director of Water Resources rather than the executive director of the board to issue the complaint to a person who violates these use and diversion of water provisions and would require a hearing to set the above-described administrative civil liability to be held before the division in accordance with the Administrative Procedure Act. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the executive director, as prescribed. The bill would authorize an appeal of the executive directors decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court. The bill would add expenditures of the division to the purposes for which the moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

(1)Existing law establishes the State Water Resources Control Board in the California Environmental Protection Agency consisting of 5 members appointed by the Governor, including one member required to be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights and one registered civil engineer under the laws of this state qualified in the fields of water supply and water rights.

This bill would revise the qualifications for the membership to the board by eliminating those requirements for qualification in the field of water rights.

(2)Under existing law, the State Water Resources Control Board administers a water rights program pursuant to which the board grants permits and licenses to appropriate water. Existing law requires a person who holds a permit or license to appropriate water, leases water pursuant to specified provisions of law, or files a specified application, registration, petition, or request relating to water use to pay fees imposed by the board. The board is required to adopt a fee schedule so that the total amount of fees collected equals that amount necessary to recover costs incurred in connection with the issuance, administration, review, monitoring, and enforcement of permits, licenses, certificates, and registrations to appropriate water, water leases, and orders approving changes in points of discharge, place of use, or purpose of use of treated wastewater. The board is required to set the amount of total revenue collected each year through the fees at an amount equal to the amount appropriated by the Legislature from the Water Rights Fund in the annual Budget Act for this activity. The revenue generated by those fees is required to be deposited in the Water Rights Fund.

This bill would transfer authority over water rights matters from the board to the Department of Water Resources, as specified. The bill would require the department to base the above-described fee schedule solely upon a ratable share of the average total actual diversion of water as reported by each water right holder in the 2 years prior. The bill would require the department to set the amount of total revenue collected each year through these fees at an amount equal to 50% of the amount appropriated by the Legislature for expenditure for support of water rights fund program activities from the Water Rights Fund.

(3)Existing law requires the Department of Water Resources and the State Water Resources Control Board to take all appropriate proceedings or actions to prevent waste, unreasonable use, unreasonable method of use, or unreasonable method of diversion of water in this state.

This bill would eliminate this duty for the board.

(4)Existing law declares that the diversion or use of water other than as authorized by specified provisions of law is a trespass. Existing law authorizes the executive director of the State Water Resources Control Board to issue a complaint to a person who violates certain use and diversion of water provisions and subjects the violator to administrative civil liability. Existing law authorizes the board to adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing, unless a written request for a hearing signed by, or on behalf of, the party served with the complaint is delivered to or received by mail by the board within 20 days after receipt of the complaint.

This bill would establish a Water Rights Division within the Office of Administrative Hearings, as prescribed. The bill would authorize the Director of Water Resources rather than the executive director of the board to issue the complaint to a person who violates these use and diversion of water provisions and would require a hearing to set the above-described administrative civil liability to be held before the division in accordance with the Administrative Procedure Act. The bill would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the director, as prescribed. The bill would authorize an appeal of the directors decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court. The bill would add expenditures of the division to the purposes for which the moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

(5)Under existing law the Department of Water Resources operates the State Water Resources Development System, known as the State Water Project, in accordance with the California Water Resources Development Bond Act to supply water to persons and entities in the state. Under existing law, the State Water Project is comprised of the State Water Facilities, as defined in the bond act, and additions determined by the department to be necessary and desirable.

This bill would establish within the Natural Resources Agency the State Water Project Commission, consisting of 9 members appointed by the Governor and subject to confirmation by the Senate. The bill would transfer authority over and relating to the State Water Project from the department to the commission, as specified.

(6)Existing law, the Sustainable Groundwater Management Act, requires all groundwater basins designated as high- or medium-priority basins by the Department of Water Resources that are designated as basins subject to critical conditions of overdraft to be managed under a groundwater sustainability plan or coordinated groundwater sustainability plans by January 31, 2020, and requires all other groundwater basins designated as high- or medium-priority basins to be managed under a groundwater sustainability plan or coordinated groundwater sustainability plans by January 31, 2022, except as specified. The act authorizes the State Water Resources Control Board to designate a high- or medium-priority basin as a probationary basin if the state board makes a certain determination and to develop an interim plan for the probationary basin.

This bill would transfer the boards authority relating to the act to the department.

(7)The provisions of this bill would become operative on July 1, 2018.

GOVERNOR'S VETO

GV Bill Id:AB 313

Author:(Gray)

As Enrolled Ver:September 19, 2017

2/3 vote

Original Committee Reference: W., P., & W.

SUMMARY: This bill would create a new Water Rights Division within the Office of Administrative Hearings (OAH) and assign to it the task of recommending a decision to the State Water Resources Control Board (State Water Board) whenever the alleged violator challenges a State Water Board charge that a water use violation has been committed.

The Senate amendments:

1. Clarify that the final arbiter on a complaint is the State Water Board as a body, not the Executive Director of the board.
2. Clarify the issuance of a complaint and process for hearing including:
   1. Commencing July 1, 2018, would authorize the board to issue a complaint seeking an order instead of directly issuing the order, requiring a person to cease and desist from diverting or using water, other than as authorized.
   2. Requiring that the complaint be served by personal notice or certified mail and inform the person that the person may request a hearing conducted by the Water Rights Division of the Office of Administrative Hearings.
   3. Would deem a decision made by an administrative law judge in the division to be a recommendation and not final until accepted by the State Water Board. Following the board’s acceptance, modification, or rejection of the recommendation, the bill would authorize the board to issue a cease and desist order.
   4. Authorizing an appeal of the board’s decision on the recommendation or of the adoption of the recommendation due to the failure to act to a superior court.

EXISTING LAW:

1. Provides that all water within the state is the property of the people of the state.
2. Provides that the people of the state have a paramount interest in the use of all the water of the state.
3. Provides that the protection of the public interest in the development of the water resources of the state is of vital concern to the people.
4. Establishes the State Water Board consisting of five members appointed by the Governor and subject to confirmation by the Senate. One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights, one shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights, one shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality, and one shall be qualified in the field of water quality. One of the above-appointed persons, in addition to having the specified qualifications, shall be qualified in the field of water supply and water quality relating to irrigated agriculture. One member shall not be required to have specialized experience.
5. Provides for the establishment of a water rights system administered by the State Water Board that entitles a water right holder to use water for beneficial purposes that are non-wasteful.
6. Recognizes two primary forms of water rights:
   1. Riparian rights, which are based on applying water from a stream or watercourse to adjoining land; and,
   2. Appropriative water rights, which attach when an entity, whether or not it borders a water course, is the first in time to divert the water and use it in a way that is both reasonable and beneficial.
7. Gives the State Water Board authority under emergency conditions when there is prolonged water shortages and/or drought and where water is not available under a diverter’s priority, to curtail diversions.
8. Authorizes the executive director of the State Water Board to issue a complaint to a person who violates certain use and diversion of water provisions.
9. Subjects water rights violators to administrative civil liability.
10. Authorizes the State Water Board to adopt an order setting administrative civil liability based on allegations set forth in the complaint without a hearing, unless a written request for a hearing is received by the board within 20 days after the complaint.
11. Establishes the Office of Administrative Hearings within the Department of General Services as a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Increased annual ongoing costs for the Water Rights Division of approximately $1 million for four Administrative Law Judges and their operating equipment and expenses (General Fund (GF) or Water Rights Fund).
2. Increased Water Rights Division costs for expert witness fees, estimated to be $11,000 per case, or up to $300,000 annually for two position years (PYs) (GF or Water Rights Fund).
3. Increased annual SWRCB costs of $150,000 (Water Rights Fund) to prepare for and participate in administrative civil liability and cease and desist order hearings, divided between SWRCB and the Water Rights Division.

COMMENTS: This bill shifts water rights hearings, where an administrative civil penalty is proposed, from the State Water Board to the Department of General Services (DGS) Office of Administrative Hearings (OAH). The bill allows for a final arbiter, the State Water Board, to determine if the recommendations of the OAH are acceptable. As is the norm in water quality and water rights cases, final appeal to the superior court is expressly allowed. Funding for the program is provided by the Water Rights Fund which is funded by fees on water rights holders.

GOVERNOR'S VETO MESSAGE:

This bill would transfer the responsibility for conducting adjudicative hearings of certain water rights enforcement actions from the State Water Resources Control Board to a new Water Rights Division in the Office of Administrative Hearings.

While I acknowledge the author's intent to increase fairness and transparency in enforcement actions taken by the Board, the bill would not work as intended. It would be difficult to recruit and retain qualified water lawyers to meet the rigid requirements of the bill. The bill creates a new division that would only conduct limited types of water right hearings, which may further complicate the process. The costs would be borne only by some water right holders but not others, regardless of who benefits.

I recognize, however, that administrative law judges can be effective in complex adjudicative matters, as evidenced in other state agencies. Therefore, I am directing the Secretary of the Environmental Protection Agency to evaluate the potential role for administrative law judges and provide a recommendation on improvements to the Board's hearing process by January 1, 2018.

Analysis Prepared by: Catherine Freeman / W., P., & W. / (916) 319-2096 FN: 0002487

 THIRD READING  

Bill No: AB 313

Author:

:

Vote:

SENATE NATURAL RES. & WATER COMMITTEE: 5-0, 6/27/17

AYES: Hertzberg, Stone, Atkins, Hueso, Vidak

NO VOTE RECORDED: Allen, Jackson, Monning, Stern

SENATE JUDICIARY COMMITTEE: 4-1, 7/11/17

AYES: Moorlach, Anderson, Hertzberg, Wieckowski

NOES: Jackson

NO VOTE RECORDED: Monning, Stern

ASSEMBLY FLOOR: 64-4, 5/30/17 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill creates a new Water Rights Division within the Office of Administrative Hearings and assigns to it the task of recommending a decision to the State Water Resources Control Board (State Water Board) whenever the alleged violator challenges a State Water Board charge that a water use violation has been committed.

ANALYSIS:

Existing law:

1. Establishes the State Water Board, consisting of five members appointed by the Governor, subject to Senate confirmation.
2. Authorizes the State Water Board to hire an executive director, who, among other things, manages the day to day operation of the organization, including overseeing the State Water Board’s water rights program.
3. Declares the Legislature’s intent that the state should take vigorous action to enforce the terms and conditions of permits licenses, certifications, and registrations to appropriate water, to enforce State Water Board orders and decisions, and to prevent the unlawful diversion of water.
4. Authorizes the executive director of the State Water Board to issue a complaint notifying an alleged violator of the State Water Board’s intent to impose civil liability for the diversion or use of water other than as authorized in the water code.
5. Authorizes the State Water Board to issue draft cease and desist orders for unauthorized, or threatened unauthorized diversion of water, and violations of permit terms, conditions, or an order.
6. Requires the complaint to inform the party that:
   1. The party may request a hearing; and
   2. The State Water Board may adopt an order setting administrative civil liability or cease and desist order based on the allegations set forth in the complaint without a hearing if the party does not request a hearing.
7. Requires that if the party requests a hearing, the hearing is held before the board or a member of the State Water Board.
8. Requires administrative hearings to be conducted in accordance with specified procedures as set forth in the administrative adjudication provisions of the Administrative Procedure Act.
9. Prohibits administrative personnel acting in a prosecutorial capacity from having ex parte communications with the person or entity responsible for ruling on the matter regarding substantive issues and controversial procedural issues within the scope of this proceeding.

This bill:

1. Establishes a Water Rights Division within the Office of Administrative Hearings consisting of four full-time Administrative Law Judges with no less than eight years’ experience as an attorney dealing with water rights matters. The Administrative Law Judges would have experts available to them; these experts shall be paid from the Water Rights Fund.
2. Provides that if an alleged violator requests a hearing to respond to a complaint from the executive director of the State Water Board alleging violations of water use laws, and if the complaint seeks to impose either administrative civil liability or a cease and desist order based on those allegations, then the hearing shall take place before the Water Rights Division within the Office of Administrative Hearings.
3. Specifies that decisions made by the Administrative Law Judges in the Water Rights Division are recommendations which may be accepted, modified, or rejected by the State Water Board before becoming final.

Comments

What Problem Are We Solving? According to the author, there is a common perception that in any water rights enforcement action, the deck is stacked in the board’s favor. Consequently, it is of little use to challenge the board’s initial complaint. Those who feel that way apparently don’t see a distinction between the staff of the board, who issue the enforcement action, and the board members themselves, who hear any challenges of the complaint.

Is The Deck Stacked? It’s hard to tell by looking at board statistics; proponents and opponents look at the same data and draw contrary conclusions. The following shows data from the five year period from 2012 through 2016 on the number of complaints imposing administrative civil liability or combined civil liability and cease and desist orders:

2,560 Number of complaints

39 Hearings requested

5 Hearings held

4 Decisions upholding complaint

1 Decisions dismissing complaint

Supporters of this bill assert that the few number of complaints that lead to an actual hearing shows there is a lack of faith in the process; folks either don’t bother trying to challenge the complaint because “what’s the use” or they settle because they see they can’t possibly win. Opponents of this bill counter that the fact that one in five decisions went against the board staff shows the board’s willingness to listen fairly to all sides.

Process Designed To Ensure Due Process. According to the Senate Judiciary Committee’s analysis of this bill, “The existing procedures for hearing and ruling on allegations of water use violations contain clear and obvious notice and hearing provisions. The only real due process question, then, is whether the fact that the existing State Water Board procedures are rendered constitutionally deficient because the prosecutorial team is part and parcel of the same administrative body that will ultimately decide the case.

“In 2009, the California Supreme Court had occasion to examine the precise question of whether or not the State Water Board’s procedures provide an impartial tribunal and therefore comply with the due process requirements of the Constitution. Morongo Band of Indians v. State Water Resources Control Board, 45 Cal.4th 731 (2009). It concluded, unanimously, that they do.”

Comparison To Other State Administrative Agencies. The State Water Board’s existing administrative enforcement procedures are similar in many ways to those used throughout California state agencies. A partial list would include: the State Air Resources Board; the State Oil and Gas Supervisor; the State Department of Health Services; the Oil Spill Response Administrator; the State Lands Commission; the San Francisco Bay Conservation and Development Commission; the Department of Fish and Game; and the Department of Forestry and Fire Protection.

According to the Senate Judiciary Committee’s analysis of this bill, “In every case, these entities utilize some variation on the basic structure. Agency staff initiates the process by charging a violation and the higher levels or other branches of the same administrative agency adjudicate any challenges or appeals. Thus, if the procedures at the State Water Board are problematic, as this bill’s proponent’s urge, it may be appropriate for the Legislature to review the corresponding procedures at a great many other state agencies as well.”

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 9/15/17)

Agricultural Council of California

Almond Alliance

Association of California Egg Farmers

Association of California Water Agencies

Banta Carbona Irrigation District

Byron-Bethany Irrigation District

California Association of Wheat Growers

California Association of Wine Grape Growers

California Bean Shippers

California Cattlemen’s Association

California Chamber of Commerce

California Citrus Mutual

California Cotton Ginners & Growers Association

California Farm Bureau Federation

California Fresh Fruit Association

California Grain & Feed Association

California League of Food Processors

California Pear Growers Association

California Seed Association

California Warehouse Association

California Wine Institute

Opportunity Stanislaus

Patterson Irrigation District

San Luis & Delta-Mendota Water Authority

Stockton East Water District

West Stanislaus Irrigation District

Western Agricultural Processors

Western Growers Association

Westlands Water District

OPPOSITION: (Verified 9/15/17)

Audubon California

California Coastal Protection Network

California League of Conservation Voters

Center for Food Safety

Clean Water Action

Community Water Center

Defenders of Wildlife

Environmental Justice Coalition for Water

Environmental Water Caucus

Food & Water Watch

Foothill Conservancy

Friends of the River

Golden Gate Fishermen’s Associations

Golden Gate Salmon Association

Mono Lake Committee

Natural Resources Defense Council

Pacific Coast Federation of Fishermen’s Associations

Sierra Club California

Southern California Watershed Alliance

The Nature Conservancy

Wholly H2O

ARGUMENTS IN SUPPORT: According to the author, “AB 313 is a simple, but important, due process bill to bring a sense of balance and fairness to water rights enforcement. Currently, the State Water Resources Control Board possesses quasi-judicial authority over water rights and conducts water rights hearings itself. The board writes regulations, initiates enforcement actions, and conducts hearings in which the Board acts as a prosecutor, judge, and jury. This is akin to letting a pitcher call his own balls and strikes. There’s a reason we have umpires in baseball; to ensure the rules are interpreted and applied fairly and without bias.

“AB 313 applies that same principle to water rights hearings by establishing a Water Rights Division at the Office of Administrative Hearings (OAH). The OAH provides a fair and neutral forum presided over by an administrative law judge to ensure that all parties are accorded the right to due process. Any enforcement actions would still be initiated by the Board, but the new division would conduct hearings and make recommendations to the Executive Director of the Board. The Executive Director would then have the final say to accept, reject, or modify the decision of the judge. This process ensures hearings are conducted objectively, while still allowing state water agency experts to give input.”

ARGUMENTS IN OPPOSITION: Opponents raise a number of points. These include:

• Separating water rights permitting and enforcement functions in different agencies would likely result in enforcement actions that are less well informed than those made by the permitting agency. In turn, this would likely lead to a greater number of Board decisions to reject recommendations by the Office of Administrative Hearings, creating uncertainty and wasting public funds.
• The enforcement and administration of water rights under existing law includes fundamental protections for due process rights, consistent with the requirements of the California Administrative Procedures Act. These strict rules prevent conflicts of interest by ensuring that the Board’s hearing officer and prosecution team cannot coordinate or discuss matters.
• During the drought, after an administrative hearing, the SWRCB dismissed the complaint against the Byron Bethany Irrigation District and West Side Irrigation District. The Board’s decision to dismiss the staff complaint demonstrates that the Board exercises independent judgment, and that the changes proposed by AB 313 are unnecessary.
• AB 313 proposes to establish a new system of administrative law judges who would consider administrative civil liability, but the SWRCB would retain its existing authority over cease and desist orders. As a result, water rights holders and SWRCB could have to participate in two separate hearings, fragmenting the state’s administration of water rights and leading to duplicative proceedings.
• AB 313 would empower the director of the SWRCB to make final determinations on the recommendations of the administrative law judges, rather than the Members of the SWRCB who are appointed by the Governor and confirmed by the Senate.

ASSEMBLY FLOOR: 64-4, 5/30/17

AYES: Acosta, Aguiar-Curry, Arambula, Baker, Bigelow, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chen, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Nazarian, Obernolte, O'Donnell, Patterson, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Thurmond, Voepel, Weber, Wood, Rendon

NOES: Harper, Muratsuchi, Quirk, Mark Stone

NO VOTE RECORDED: Travis Allen, Berman, Bloom, Chau, Chiu, Choi, Eggman, Gloria, Limón, Mullin, Ting, Waldron

Prepared by:

9/16/17 1:17:55

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: AB 313 (Author:Gray)

Version: July 3, 2017

Hearing Date: July 11, 2017

Fiscal: Yes

Urgency: No

TSGConsultant: TSG

SUBJECT

Water

DESCRIPTION

This bill would create a new Water Rights Division within the Office of Administrative Hearings and assign to it the task of recommending a decision to the State Water Resources Control Board whenever the alleged violator challenges a State Water Board charge that a water use violation has been committed.

BACKGROUND

The State Water Resources Control Board (“State Water Board”) is composed of five members appointed by the Governor, preferably from different regions of the state, and subject to approval by the State Senate. Four of the positions on the Water Board require professional expertise related to water. There must be one attorney, two engineers, and one water quality expert. All of the four have to have specialized knowledge relating to water. At least one of the four must have particular expertise in the use of water as it relates to agriculture. The last member is not required to have any particular expertise at all.

The State Water Board is responsible for enforcing California’s water rights laws. Under the existing procedures, when the State Water Board staff believes that some person or entity has violated the state’s water use laws, it can take a number of different actions. If the alleged violation already took place, the staff can seek Administrative Civil Liability – fines, in effect – against the alleged violator. If the alleged violation is imminent or ongoing, the State Water Board staff can issue a proposed Cease and Desist Order. In either instance, the alleged violator has the opportunity to challenge the State Water Board staff allegations by requesting a hearing on the matter to the State Water Board.

Under existing procedures, if the alleged violator requests a hearing, the full State Water Board may hear the case or, alternatively, a single member of the State Water Board may serve as the Hearing Officer and preside over the case. In either case, a team of State Water Board staff (the “hearing team”), usually including an attorney, a water resources control engineer and a water scientist, assists the decision maker with the case. A second team of State Water Board staff (the “prosecution team”), presents evidence and makes the argument to the decision maker as to why the prosecution team believes the water rights violation allegation it has made is true. The alleged violator has an opportunity to present its case and cross-examine witnesses in an effort to convince the decision maker that the prosecution team’s allegations are false, that it has a valid defense for its actions, or that there are mitigating circumstances, among other things.

During this process, the “hearing team” and the “prosecution team” are, in accordance with the Administrative Procedures Act, forbidden from communicating with one another about the case and the prosecution team is forbidden from communicating with the decision maker about the case outside of the public hearing.

Once the hearing is over, the decision maker rules on the case. If the decision maker was a single member of the State Water Board, the full State Water Board may review the individual member’s decision and either uphold, modify, or overturn it.

The proponents of this bill find the existing process deficient, believing that the “firewall” between the State Water Board’s “hearing” and “prosecution” teams is insufficient to meet the requirements of due process. Fundamentally, they object to what they view as a procedure in which different elements of the State Water Board act in the roles of both prosecution and decision-maker. The results of such a system, they assert, will always be susceptible to the perception of bias, even if no actual bias takes place.

AB 313 purports to offer a solution to this perceived problem. Instead of having members of the State Water Board preside over the hearings with the assistance of a “hearing team,” this bill would outsource that task to a new Water Rights Division within the Office of Administrative Hearings. This new Division, consisting of four Administrative Law Judges, would preside over an initial hearing, at which the State Water Board’s “prosecution team” and the alleged violator would present their respective cases. After hearing the evidence and arguments, the Administrative Law Judge would then present a recommended ruling to the full State Water Board, which would have the option to implement, modify, or overturn the recommendation.

In summary, the State Water Board would still charge cases of water rights violations and the State Water Board, ultimately, would still decide them. AB 313 would transfer the middle part of the process to a new entity outside of the State Water Board.

This bill passed out of the Senate Committee on Natural Resources and Water on a 5 to 0 vote.

CHANGES TO EXISTING LAW

Existing law establishes the State Water Resources Control Board, consisting of five members appointed by the Governor, subject to Senate confirmation, as follows: (a) one of the members appointed must be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights; (b) one must be a registered civil engineer under the laws of California who is qualified in the fields of water supply and water rights; (c) one must be a registered professional engineer under the laws of California who is experienced in sanitary engineering and who is qualified in the field of water quality; (d) one must be qualified in the field of water quality; (e) one of the above-appointed persons, in addition to having the specified qualifications, must be qualified in the field of water supply and water quality relating to irrigated agriculture; (f) one member shall not be required to have specialized experience; and (g) to the extent possible, the board is to be composed of members from different regions of the state. (Wat. Code Sec. 175.)

Existing law empowers the State Water Board to hire an executive director, who, among other things, manages the day to day operation of the organization, including overseeing the State Water Board’s water rights program. (Wat. Code Sec. 186.)

Existing law declares the Legislature’s intent that the state should take vigorous action to enforce the terms and conditions of permits licenses, certifications, and registrations to appropriate water, to enforce State Water Board orders and decisions, and to prevent the unlawful diversion of water. (Wat. Code Sec. 1825.)

Existing law provides the executive director of the State Water Board may issue a complaint notifying an alleged violator of the State Water Board’s intent to impose civil liability for the diversion or use of water other than as authorized in the water code. (Wat. Code Sec. 1055(a).)

Existing law provides that the State Water Board may issue draft cease and desist orders for unauthorized, or threatened unauthorized diversion of water, and violations of permit terms, conditions, or an order. (Wat. Code Sec. 1834(a).)

Existing law provides that the complaint is required to inform the party that: (a) the party may request a hearing; and (b) the State Water Board may adopt an order setting administrative civil liability or cease and desist order based on the allegations set forth in the complaint without a hearing if the party does not request a hearing, as specified. (Wat. Code Secs. 1055(b) and 1834(b).)

Existing law dictates that if the party requests a hearing, the hearing is held before the board or a member of the State Water Board. (Wat. Code Sec. 183.)

Existing law requires administrative hearings to be conducted in accordance with specified procedures as set forth in the administrative adjudication provisions of the Administrative Procedure Act. (Gov. Code Secs. 11400 et seq. and 11500 et seq.)

Existing law prohibits administrative personnel acting in a prosecutorial capacity from having ex parte communications with the person or entity responsible for ruling on the matter regarding substantive issues and controversial procedural issues within the scope of this proceeding. (Gov. Code Secs. 11430.10-11430.80.)

This bill would establish a Water Rights Division within the Office of Administrative Hearings consisting of four full-time Administrative Law Judges with no less than eight years’ experience as an attorney dealing with water rights matters. The Administrative Law Judges would have experts available to them; these experts shall be paid from the Water Rights Fund.

This bill would provide that if an alleged violator requests a hearing to respond to a complaint from the executive director of the State Water Board alleging violations of water use laws, and if the complaint seeks to impose either administrative civil liability or a cease and desist order based on those allegations, then the hearing shall take place before the Water Rights Division within the Office of Administrative Hearings.

This bill would specify that decisions made by the Administrative Law Judges in the Water Rights Division are recommendations which may be accepted, modified, or rejected by the State Water Board before becoming final.

COMMENT

1. Stated need for the bill

According to the author:

AB 313 is a simple, but important, due process bill to bring a sense of balance and fairness to water rights enforcement. Currently, the State Water Resources Control Board possesses quasi-judicial authority over water rights and conducts water rights hearings itself. The Board writes regulations, initiates enforcement actions, and conducts hearings in which the Board acts a prosecutor, judge, and jury. This is akin to letting a pitcher call his own balls and strikes. There’s a reason we have umpires in baseball; to ensure the rules are interpreted and applied fairly and without bias.

AB 313 applies that same principle to water rights hearings by establishing a Water Rights Division at the Office of Administrative Hearings (OAH). The OAH provides a fair and neutral forum presided over by an administrative law judge to ensure that all parties are accorded the right to due process. Any enforcement action would still be initiated by the Board, but the new division would conduct hearings and make recommendations to the Executive Director of the Board. The Executive Director would then have the final say to accept, reject, or modify the decision of the judge. This process ensures hearings are conducted objectively, while still allowing state water agency experts to give input.

In support, the Byron-Bethany Irrigation District writes:

Rather than delivering the impartiality all water rights holders deserve, the current system is hampered by inherent biases and conflicts of interest. It allows state agencies to act with unchecked power, with little accountability to the communities they’re supposed to serve. AB 313 changes that. The bill’s proposal to restructure water hearings […] will reestablish fairness in such hearings.

Currently, the State Water Resources Control Board (SWRCB) exercises near-blanket control over water rights. The SWRCB writes regulations, initiates enforcement actions, and conducts hearings in which Board staff act as prosecutors and the SWRCB itself acts as the judge and jury. That structure results in an unfair process in which water rights holders are denied due process and impartiality.

In further support, a coalition of agricultural industry representatives writes:

The current system of managing California’s water, our most precious resource, simply does not work. The current system provides the State Water Resources Control Board authority over allocating water rights and permits, enforcing those rights and allocating the punishment, if they believe there has been a violation by a water user. This action is intended to be quasi-judicial. However, when water rights hearings held by appointed water board members using their own staff as investigator and prosecutor while the board members themselves acted as judge and jury [sic]. Additionally, they have inadequate structural separations of duties to effectively serve the quasi-judicial functions. The current system creates an inherent challenge for the board to provide a fair hearing and appropriate judicial review […].

2. Expressed concerns with the bill

In opposition to the bill, a coalition of environmental organizations writes:

AB 313 is unnecessary, increases state costs, and would impede the orderly administration of water rights in the State, and it threatens water rights holders, California’s rivers and fisheries, and the communities and job that depend on healthy fisheries.

AB 313’s proposal to limit the SWRCB water rights through administrative civil liability is unnecessary because the Board already ensures the protection of due process rights and avoids conflicts of interest.

In further opposition, three fishing industry advocacy groups write:

Healthy salmon runs and a healthy fishing industry require healthy rivers. This health can only be restored and protected if the Board has an effective water rights enforcement process to discourage and stop illegal water diversions. This bill would undermine the Board’s existing enforcement process, threatening our industry and threatening jobs in coastal communities from Santa Barbara to the Oregon border, in the Bay-Delta region and along our rivers.

[…] Our organizations believe that the State Board’s enforcement program should be strengthened. However, this bill moves in the opposite direction…

3. Assessing the existence of bias

Committee staff is unable to say, by looking at the outcomes of cases, whether or not the current system contains bias. According to the analysis of this bill prepared by the Senate Committee on Natural Resources and Water, the statistics on State Water Board water rights violation charges for the period 2012 to 2016 are as follows:

Number of complaints 2,560

Hearings requested 39

Hearings held 5

Decisions upholding complaint 4

Decisions dismissing complaint 1

Proponents of this bill point to the State Water Board prosecution team’s five win and one loss track record and suggest the deck must be stacked in the prosecution’s favor. Arguably, however, this is only evidence that State Water Board staff is appropriately conservative and cautious in its case selection, only bringing charges when the facts and law are demonstrably in their favor. For their part, opponents of this bill point to the prosecution teams’ one big loss as evidence that the full Board is clearly capable of rejecting its staff’s recommendations. Of course, however, any individual outcome is not necessarily indicative of wider trends.

In sum, there does not appear to be an objective basis on which to conclude that the existing State Water Board administrative procedure is or is not biased in any particular direction. Subjectively, environmental groups seem generally to believe that the State Water Board does not go far enough to protect fish and other natural systems that are dependent on water. For their part, water districts and some water users generally seem to think that the State Water Board does not go far enough toward meeting their needs for water. The fact that both sides are somewhat disappointed may itself be an indicator that the State Water Board is not especially biased in one direction or the other.

4. Constitutional due process considerations

The Fifth Amendment to the U.S. Constitution states: “[n]o person shall be… deprived of life, liberty, or property, without due process of law…” The Fourteenth Amendment imposes the same requirement upon the states. The U.S. Supreme Court has not given any hard and fast meaning to “due process of law.” According to the Court: “due process, unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place, and circumstances. Due process is flexible and calls for such procedural protections as the particular situation demands.” At a minimum, however, due process of law always entails “certain basic safeguards such as notice of the charges or issue, the opportunity for a meaningful hearing, and an impartial decision maker.”^[1]

The existing procedures for hearing and ruling on allegations of water use violations contain clear and obvious notice and hearing provisions. The only real due process question, then, is whether the fact that the existing State Water Board procedures are rendered constitutionally deficient because the prosecutorial team is part and parcel of the same administrative body that will ultimately decide the case.

The U.S. Supreme Court has emphasized the critical role of an impartial decision maker, calling it an “essential” right in civil proceedings. (Goldberg v. Kelly (1970) 397 U.S. 254, 271.)

The neutrality requirement helps to guarantee that life, liberty, or property will not be taken on the basis of an erroneous or distorted conception of the facts or the law […]. At the same time, it preserves both the appearance and reality of fairness […] by ensuring that no person will be deprived of his interests in the absence of a proceeding in which he may present his case with assurance that the arbiter is not predisposed to find against him. (Marshall v. Jerrico (1980) 446 U.S. 238, 242.)

At the same time, there is a “presumption of honesty and integrity in those serving as adjudicators,” (Schweiker v. McClure (1982) 456 U.S. 188, 195) such that “the combination of investigative and adjudicative functions does not, without more, constitute a due process violation” (Withrow v. Larkin (1975) 421 U.S. 35, 58.) Moreover, the Court has noted, such arrangements are quite common in the administrative law context. Thus:

It is also very typical for the members of administrative agencies to receive the results of investigations, to approve the filing of charges or formal complaints instituting enforcement proceedings, and then to participate in the ensuing hearings. This mode of procedure does not violate the Administrative Procedure Act, and it does not violate due process of law. (Withrow v. Larkin (1975) 421 U.S. 35, 57.)

In 2009, the California Supreme Court had occasion to examine the precise question of whether or not the State Water Board’s procedures provide an impartial tribunal and therefore comply with the due process requirements of the Constitution. Morongo Band of Indians v. State Water Resources Control Board, 45 Cal.4th 731 (2009). It concluded, unanimously, that they do.

5. Administrative Procedures Act considerations

The California Administrative Procedures Act sets forth certain requirements that state agencies’ administrative adjudication procedures must meet in order to be lawful. (Gov. Code Sec. 11400 et seq.) A basic review of the State Water Board adjudication process relating to provision of notice and hearing procedures suggests that the State Water Board follows – indeed explicitly incorporates – much of the Administrative Procedures Act requirements.

With regard to the issue of greatest factual contention in this bill – the separation or “firewall” between the State Water Board’s “prosecution” and “hearing” teams – it is, of course, impossible to say, without surreptitiously observing the day-to-day function of State Water Board staff, whether the two teams scrupulously follow the rules and whether such rigid separation is truly possible in the context of the day-to-day reality of working within the same agency. However, as legal matter, the sort of “firewall” separation of functions employed by the Water Board does appear to be sanctioned by the Act. (Gov. Code Secs. 11430.10-11430.80.)

6. Policy considerations

The fact that the due process provided by the current administrative water rights enforcement system is constitutionally and legally sufficient does not mean that a different structure is undesirable. In other words, moving the adjudicative hearings to Office of Administrative Hearings might still be a good idea, even if it is not legally necessary to do so. In evaluating this, the Committee may wish to consider the following issues.

1. Access to expertise

A sound system of adjudication requires that the resulting decisions are well-informed. Both proponents and opponents of this bill agree that water law is complex and that adjudication of allegations of water rights violations requires an understanding not just of the legal doctrine, but also the science behind the evidence.

Opponents of this bill assert that this is one of the virtues of the current Water Board adjudication system. State Water Board staff are highly trained and specialized in water law and science. Moreover, they are experienced in handling administrative proceedings relating to allegations of water law violations. This is what they do. Moving the hearing phase of the adjudicative process to brand new Administrative Law Judges in the Office of Administrative Hearings, the opponents believe, deprives the process of this valuable expertise and experience and would therefore make the system more prone to erroneous decisions.

Proponents of this bill counter, first, that any expertise lost is outweighed by greater independence. Second, they note that the new Administrative Law Judges are required to come with significant water law experience. Third, they point out that AB 313 explicitly provides for the availability of experts to assist the Administrative Law Judges as necessary, much as the State Water Board “hearing” teams assist Hearing Officers now. As for experience adjudicating water use violation cases, the proponents say, the Administrative Law Judges will obtain that over time.

1. Efficiency

Proponents of AB 313 suggest that outsourcing the hearing phase of the State Water Board water use violation adjudication process to the Office of Administrative Hearings could result in certain improvements in how quickly cases are decided. The theory seems to be that Administrative Law Judges will be less forgiving about granting continuances. Proponents of AB 313 also anticipate that the Administrative Law Judges might produce a higher quality administrative record. The basis for this belief seems to be that, while State Water Board staff and members may be experts in water law, they are less so when it comes to assembling a record.

For their part, opponents of the bill point out that, as a preliminary matter, the procedures envisioned by AB 313 would require the creation of a whole new division of administrative law and associated staffing and procedures. This concern is arguably mitigated to some degree by the fact that the new division will be housed within an existing framework, and is, at worst, a short term inefficiency lasting only as long as it takes to get set up. Nonetheless, creating the new division will undoubtedly require time and resources that might arguably be better spent elsewhere. Secondarily, opponents of the bill point out that, at least in those instances in which the full State Water Board hears a case under the current system, the new system would require two hearings in lieu of one. Finally, opponents of the bill note that in the current system, at least one State Water Board member is engaged in and aware of the details of a case by the time it gets to the full State Water Board for a final decision. Under the process proposed by AB 313, State Water Board members would start from scratch with each case, since their first interaction with it would come in the form of the recommendation and the record produced by the Administrative Law Judge.

1. Independence of the decision maker

The chief argument asserted by Proponents of AB 313 is that the current State Water Board water rights violation adjudication procedure is fundamentally flawed on due process grounds. From their viewpoint, the process cannot be fair – or can never be perceived as fair – so long as the State Water Board acts as both prosecutor and decision-maker in these cases. As discussed further in Comment 7, below, to the degree this is a fundamental flaw in the State Water Board’s procedures, it may be a fundamental flaw with many other state administrative adjudication procedures as well.

In comparing the existing system to what AB 313 proposes, moreover, it is not immediately obvious how the new procedure actually corrects the alleged fundamental flaw in the current system. Under the current system, State Water Board staff issues the charge, State Water Board staff prosecutes the matter, other State Water Board staff assist a Hearing Office to produce an initial ruling, and it all ultimately comes down to a decision by: the State Water Board itself, which can uphold, modify, or overturn the initial ruling. Under AB 313, State Water Board staff issues the charge, State Water Board staff prosecutes the charge, an Administrative Law Judge hears out the parties, the Administrative Law Judge makes a recommendation, and it all ultimately comes down to a final decision by: the State Water Board itself, which can uphold, modify, or overturn the recommendation. These are somewhat different procedures to be sure, but the State Water Board and its staff act as prosecutor and decision-maker in both. Arguably, therefore, AB 313 does not appear to achieve the very thing its proponents assert is its central purpose.

7. Comparison to other state administrative agencies

The State Water Board’s existing administrative enforcement procedures are similar in many ways to those used throughout California state agencies. A partial list would include: the State Air Resources Board (Health & Saf. Code Sec. 43028); the State Oil and Gas Supervisor (Pub. Resources Code Sec. 3236.5); the State Department of Health Services (Welf. & Inst. Code Sec. 14123.25); the Oil Spill Response Administrator (Gov. Code Secs. 8670.67 and 8670.68); the State Lands Commission (Pub. Resources Code Sec. 71216); the San Francisco Bay Conservation and Development Commission (Gov. Code Secs. 66641.5, 66641.6 66641.7, 66641.8 and 66641.9); the Department of Fish and Game (Fish & G. Code Secs. 500, 2300, 2301, 2582 and 72583); and the Department of Forestry and Fire Protection (Pub. Resources Code Secs. 4601.1 and 4601.2). In every case, these entities utilize some variation on the basic structure. Agency staff initiates the process by charging a violation and the higher levels or other branches of the same administrative agency adjudicate any challenges or appeals. Thus, if the procedures at the State Water Board are problematic, as this bill’s proponent’s urge, it may be appropriate for the Legislature to review the corresponding procedures at a great many other state agencies as well.

It has been suggested that the recent decision to transfer the State Board of Equalization’s former adjudicatory functions to the Office of Administrative Hearings provide precedent for this bill. The comparison is arguably inapposite, however, because the impetus behind the restructuring of the State Board of Equalization was unrelated to the structure of its adjudicative procedures.

In the context of other state agencies, this Committee has passed bills this session that exhibit the same basic structure found in the existing State Water Board adjudicatory procedure. SB 378 (Portantino, 2017) would expand the power of the state Alcohol and Beverage Control Commission to suspend the liquor license of a business, subject to a right of hearing before the Alchohol and Beverage Control Commission. SB 378 passed out of this Committee unanimously. SB 306 (Hertzberg, 2017) would give new powers to the Labor Commissioner to issue citations to employers for acts of unlawful retaliation relating to the exercise of workers’ rights. If the employer challenges such a citation, SB 306 envisions a hearing to adjudicate the matter at which a Hearing Officer from the Labor Commission would preside. SB 306 passed out of this Committee on a five to one vote. SB 486 (Monning, 2017) would provide the State Contractors’ Licensing Board (SCLB) with new powers to issue letters of admonishment to contractors that the SCLB believes have violated the laws or regulations governing that industry. The alleged violator can request a conference to challenge the letter of admonishment. Such a conference would take place before the registrar, who is part of the staff of the SCLB. SB 486 passed out of this Committee unanimously.

All of these systems can be criticized on the ground that one and the same agency makes the allegations and decides the case. The safeguard in almost every instance is the same one available to respondents before the State Water Board: if the respondent believes that the State Water Board’s final ruling is erroneous or contrary to law, the respondent may challenge that ruling in civil court through the writ of mandamus procedure. (See Wat. Code Sec. 1126 et seq.; Code of Civ. Proc. Sec. 1084 et seq.)

Support: Agricultural Council of California; Almond Alliance; Association of California Egg Farmers; Association of California Water Agencies; Banta Carbona Irrigation District; Byron-Bethany Irrigation District; California Association of Wheat Growers; California Association of Wine Grape Growers; California Bean Shippers; California Cattlemen’s Association; California Citrus Mutual; California Cotton Ginners & Growers Association; California Farm Bureau Federation; California Fresh Fruit Association; California Grain & Feed Association; California League of Food Processors; California Pear Growers Association; California Seed Association; California Warehouse Association; California Wine Institute; Opportunity Stanislaus; Patterson Irrigation District; San Luis & Delta-Mendota Water Authority; Stockton East Water District; West Stanislaus Irrigation District; Western Agricultural Processors; Western Growers Association; Westlands Water District

Opposition: Audubon California; California Coastal Protection Network; California League of Conservation Voters; California Sportfishing Protection Alliance; California Water Association; California Water Impact Network; Center for Food Safety; Clean Water Action; Community Water Center; Defenders of Wildlife; Environmental Justice Coalition for Water; Food & Water Watch; Foothill Conservancy; Friends of the River; Golden Gate Salmon Association; Golden Gate Fishermen’s Associations; Mono Lake Committee; Natural Resources Defense Council; The Nature Conservancy; the Pacific Coast Federation of Fisherman’s Associations; Sierra Club California; Southern California Watershed Alliance Environmental Water Caucus; Wholly H2O

HISTORY

Source: Author

Related Pending Legislation: None known

Prior Legislation:

AB 763 (Berryhill, 2011) would have authorized a person who files an application to appropriate water, a protest to an application to appropriate water, a petition to change the point of diversion, place of use, or purpose of use of the water in an application, permit, or license, or a protest to a petition, to appeal specified determinations for review by a member of the board or an administrative law judge before the board takes final action on the application or petition. AB 763 was withdrawn from consideration before the Assembly Committee on Water, Parks and Wildlife at the request of the author.

AB 1453 (Daucher, 2005) would have required the presiding judge of the superior court of each specified county to assign a water judge to the water division to preside over actions that involve the adjudication of rights to produce groundwater, as specified, and would have provided for the transfer of groundwater actions to those courts. AB 1453 was withdrawn from consideration before the Assembly Judiciary Committee at the request of the author.

Prior Vote:

Senate Natural Resources and Water Committee (Ayes 5, Noes 0)

Assembly Floor (Ayes 64, Noes 4)

Assembly Appropriations Committee (Ayes 15, Noes 0)

Assembly Water, Parks and Wildlife Committee (Ayes 13, Noes 0)

**************

1. Chemerinsky, Constitutional Law Policies and Principles, Fifth Edition (2015), p. 606. ↑

SENATE COMMITTEE ON NATURAL RESOURCES AND WATER

Senator Robert Hertzberg, Chair

2017 - 2018 Regular

Bill No: AB Hearing Date: June 27, 2017

Subject: Water

BACKGROUND AND EXISTING LAW

1. California has over 80 boards, bureaus, and commissions. A common structure for these board, bureaus, and commissions is as follows:
   1. The Governor appoints the members, who are subject to senate confirmation.
   2. The board establishes policies and regulations regarding their jurisdiction.
   3. The staff are lead by a chief executive officer, who is appointed by the board.
   4. The staff implement the board’s policies and enforce the board’s regulations, including issuing any enforcement orders.
   5. The board hears and decides any challenges to the enforcement orders.
2. The legislature established the State Water Resources Control Board (SWRCB or board) in 1967 by merging the State Water Rights Board and the State Water Quality Control Board. In establishing the new board, the Legislature, among other things:
   1. Found and declared “that in order to provide for the orderly and efficient administration of the water resources of the state, it is necessary to establish a control board that shall exercise the adjudicatory and regulatory functions of the state in the field of water resources.”
   2. Stated the intention of the Legislature to combine the water rights and the water pollution and water quality functions of state government to provide for consideration of water pollution and water quality, and availability of unappropriated water whenever applications for appropriation of water are granted or waste discharge requirements or water quality objectives are established. (This was subsequently amended in 2014 to reflect the transfer of regulation of drinking water to State Water Board)
3. The board consists of five members appointed by the Governor, subject to Senate confirmation.
   1. One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights,
   2. One shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights,
   3. One shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality, and
   4. One shall be qualified in the field of water quality.
   5. One of the above-appointed persons, in addition to having the specified qualifications, is required to be qualified in the field of water supply and water quality relating to irrigated agriculture.
   6. One member shall not be required to have specialized experience.
   7. To the extent possible, the board is to be composed of members from different regions of the state.
4. Board hires the executive director, who, among other things, manages the day to day operation of the organization, including overseeing the board’s water rights program.
5. Current law states the Legislature’s intent that the state should take vigorous action to enforce the terms and conditions of permits licenses, certifications, and registrations to appropriate water, to enforce state board orders and decisions, and to prevent the unlawful diversion of water.
6. Current law establishes that the diversion or use of water other than as authorized in the water code is a trespass.
   1. Any person or entity committing a trespass as defined in this section may be liable according to a specified schedule, which depends in part on whether the trespass took place during a period of critical shortage, as specified.
   2. Civil liability may be imposed by the superior court or the board.
7. The board may also issue a draft cease and desist order for unauthorized, or threatened unauthorized diversion of water, and violations of permit terms, conditions, or an order.
8. The executive director of the board may issue a complaint to any person or entity on which administrative civil liability may be imposed. The complaint is required to inform the party both the following:
   1. That the party may request a hearing.
   2. That the board may adopt an order setting administrative civil liability based on the allegations set forth in the complaint without a hearing if the party does not request a hearing, as specified.
9. If the party requests a hearing, the hearing is held before the board or a member of the board.
   1. The hearings are conducted pursuant to the administrative adjudication provisions of the Administrative Procedure Act. (Chapters 4.5 and 5 (commencing with Sections 11400 & 11500) of Part 1 of Division 3 of Title 2 of the Government Code).
   2. The board or board member presiding over the hearing is supported by a hearing team. The hearing team provides legal and technical advice, and assists the hearing officer and other members of the State Water Board throughout the proceeding.
   3. The prosecution is presented by a separate prosecution team.
   4. Key provisions of the administrative adjudication provisions of the Administrative Procedure Act require the prosecution team to be separated from the hearing team and the prosecution team is prohibited from having ex parte communications with any members of the State Water Board and any members of the hearing team regarding substantive issues and controversial procedural issues within the scope of this proceeding. This separation of functions also applies to the supervisors of each team.
10. The board, after any necessary hearing, may adopt an order setting administrative civil liability, or determining that a liability shall not be imposed. Orders setting administrative civil liability become effective and final upon issuance thereof and payment shall be made.
11. Existing law also establishes the Office of Administrative Hearings (OAH) within the Department of General Services as a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division.

PROPOSED LAW

This bill would change the hearing procedure for challenging a complaint assessing administrative civil penalties issued by the executive director of the board for illegal diversion or use.

Specifically, it would:

1. Establish within the Office of Administrative Hearings (OAH) a Water Rights Division.
   1. The division would consist of no fewer than four full-time administrative law judges.
   2. An administrative law judge of the division, in addition to the other qualifications required of administrative law judges, would be required to have no less than eight years experience as an attorney dealing with water rights matters.
2. Change the hearing from being before the board or a member of the board to being heard by an administrative law judge within the Water Rights Division of OAH.
3. Change the final determination of the hearing from the board to the executive director.
   1. A decision made by an administrative law judge in the division would be deemed a recommendation and would not be final until accepted by the Executive Director of the State Water Board.
   2. The Executive Director of the State Water Board could review materials from the hearing record, as necessary, and would have the authority to accept, modify, or reject the recommendation.
   3. The Executive Director of the State Water Board would be required to make a final decision accepting, modifying, or rejecting the division’s recommendation within 30 days of the issuance of that recommendation.
   4. If the Executive Director of the State Water Board did not act on a recommendation within 30 days, the recommendation would be deemed adopted.
   5. The Executive Director’s of the State Water Board’s decision on the recommendation, or the adoption of the recommendation due to the failure to act, would be a final agency action that could be appealed to a superior court of the State of California.
4. Authorize the expenditure of moneys in the Water Rights Fund for expenditures by the Water Rights Division of the Office of Administrative Hearings for the purposes of carrying out the provisions of this bill.

ARGUMENTS IN SUPPORT

According to the author, “AB 313 is a simple, but important, due process bill to bring a sense of balance and fairness to water rights enforcement. Currently, the State Water Resources Control Board possesses quasi-judicial authority over water rights and conducts water rights hearings itself. The board writes regulations, initiates enforcement actions, and conducts hearings in which the Board acts as a prosecutor, judge, and jury. This is akin to letting a pitcher call his own balls and strikes. There’s a reason we have umpires in baseball; to ensure the rules are interpreted and applied fairly and without bias.”

“AB 313 applies that same principle to water rights hearings by establishing a Water Rights Division at the Office of Administrative Hearings (OAH). The OAH provides a fair and neutral forum presided over by an administrative law judge to ensure that all parties are accorded the right to due process. Any enforcement actions would still be initiated by the Board, but the new division would conduct hearings and make recommendations to the Executive Director of the Board. The Executive Director would then have the final say to accept, reject, or modify the decision of the judge. This process ensures hearings are conducted objectively, while still allowing state water agency experts to give input.”

ARGUMENTS IN OPPOSITION

Opponents raise a number of points. These include:

• Separating water rights permitting and enforcement functions in different agencies would likely result in enforcement actions that are less well informed than those made by the permitting agency. In turn, this would likely lead to a greater number of Board decisions to reject recommendations by the Office of Administrative Hearings, creating uncertainty and wasting public funds.
• The enforcement and administration of water rights under existing law includes fundamental protections for due process rights, consistent with the requirements of the California Administrative Procedures Act. These strict rules prevent conflicts of interest by ensuring that the Board’s hearing officer and prosecution team cannot coordinate or discuss matters.
• During the drought, after an administrative hearing, the SWRCB dismissed the complaint against the Byron Bethany Irrigation District and West Side Irrigation District. The Board’s decision to dismiss the staff complaint demonstrates that the Board exercises independent judgment, and that the changes proposed by AB 313 are unnecessary.
• AB 313 proposes to establish a new system of administrative law judges who would consider administrative civil liability, but the SWRCB would retain its existing authority over cease and desist orders. As a result, water rights holders and SWRCB could have to participate in two separate hearings, fragmenting the State’s administration of water rights and leading to duplicative proceedings.
• AB 313 would empower the director of the SWRCB to make final determinations on the recommendations of the administrative law judges, rather than the Members of the SWRCB who are appointed by the Governor and confirmed by the Senate.

COMMENTS

What Problem Are We Solving? According to the author, there is a common perception that in any water rights enforcement action, the deck is stacked in the board’s favor. Consequently, it is of little use to challenge the board’s initial complaint. Apparently, those who feel that way don’t see a distinction between the staff of the board, who issue the enforcement action, and the board members themselves, who hear any challenges of the complaint.

Is The Deck Stacked? It’s hard to tell by looking at board statistics; proponents and opponents look at the data and draw contrary conclusions. The following shows data from the five year period from 2012 through 2016 on the number of complaints imposing administrative civil liability or combined civil liability and cease and desist orders:

2,560 Number of complaints

39 Hearings requested

5 Hearings held

4 Decisions upholding complaint

1 Decisions dismissing complaint

Supporters of this bill assert that the few number of complaints that lead to an actual hearing shows there is a lack of faith in the process; folks either don’t bother trying to challenge the complaint because “what’s the use” or they settle because they see they can’t possibly win. Opponents of this bill counter that the fact that 1 in 5 decisions went against the board staff shows the board’s willingness to listen fairly to all sides.

Process Designed To Ensure Due Process. This is really more of an issue for the Senate Judiciary Committee, which will hear this bill should it pass this committee. But, the administrative adjudication provisions of the Administrative Procedure Act are designed to protect due process rights. The Judiciary Committee will be in a better position to assess whether the board isn’t applying the Act appropriately or if there is some failing of the Act itself.

Bill Eliminates Key Check On Executive Director. Currently, the executive director issues the complaint, and the board hears and rules on the complaint. This bill would have the executive director of the board both initiating the complaint, and then determining whether to accept the administrative law judge’s recommended ruling. This would seem to exacerbate the perception that board staff are both prosecutor and judge.

Could Lead To Duplicate Hearings And Contradictory Outcomes. In many cases, the board issues complaints assessing administrative civil liability and issuing a cease and desist order. This bill would create a process for administrative civil liability cases that is different from that used for cease and desist cases. These different hearing process for different actions associated with the same complaint could lead to different findings of facts and contradictory outcomes. According to the author’s staff, they intend to amend this bill in the Judiciary Committee address this potential problem, presuming this committee passes this bill.

Likely Will Lead To Higher Water Rights Fees. This bill authorizes the use of the Water Rights Fund to cover the costs of the new OAH process created by this bill. Should this bill pass this and the Judiciary Committees, our Appropriations Committee staff will do their own assessment of the bill’s costs.

That said, the Assembly Appropriations Committee’s analysis is informative. The Water Rights Fund is funded mostly from fees assessed on water rights and reports on the use of water rights. The Assembly Appropriations analysis estimates this bill would lead to an additional $1.45 M in costs. The fund condition for the Water Rights Fund shows estimated revenues from regulatory fees to be $19.6M. This would suggest water rights fees would need to be raised about 7% across the board to cover the costs of this bill.

Previous Bills. While there haven’t been any bills making this precise proposal, there have been analogous efforts.

AB 763 (2011, Bill Barryhill) – would have authorized a person who files an application to appropriate water, a protest to an application to appropriate water, a petition to change the point of diversion, place of use, or purpose of use of the water in an application, permit, or license, or a protest to a petition, to appeal specified determinations for review by a member of the board or an administrative law judge before the board takes final action on the application or petition. (Hearing canceled at the request of author.)

AB 1453 (2005, Daucher) – would have required the presiding judge of the superior court of each specified county to assign a water judge to the water division to preside over actions that involve the adjudication of rights to produce groundwater, as specified, and would provide for the transfer of groundwater actions to those courts. (Hearing canceled at the request of author.)

Double-Referral. The Rules Committee referred this bill to both the Committee on Natural Resources and Water and to the Committee on Judiciary. Therefore, if this bill passes this committee, it will be referred to the Committee on Judiciary, which will consider the issues within their jurisdiction.

SUGGESTED AMENDMENTS: None

SUPPORT

Agricultural Council of California

Almond Alliance

Association of California Egg Farmers

Association of California Water Agencies

Banta Carbona Irrigation District

Byron-Bethany Irrigation District

California Association of Wheat Growers

California Association of Wine Grape Growers

California Bean Shippers

California Cattlemen’s Association

California Chamber of Commerce

California Citrus Mutual

California Cotton Ginners & Growers Association

California Farm Bureau Federation

California Fresh Fruit Association

California Grain & Feed Association

California League of Food Processors

California Pear Growers Association

California Seed Association

California Warehouse Association

California Wine Institute

Opportunity Stanislaus

Patterson Irrigation District

San Luis & Delta-Mendota Water Authority

Stockton East Water District

West Stanislaus Irrigation District

Western Agricultural Processors

Western Agricultural Processors

Western Growers Association

Westlands Water District

OPPOSITION

Audubon California

California Coastal Protection Network

California League of Conservation Voters

Center for Food Safety

Clean Water Action

Community Water Center

Defenders of Wildlife

Environmental Justice Coalition for Water

Environmental Water Caucus

Food & Water Watch

Foothill Conservancy

Friends of the River

Golden Gate Fishermen’s Associations

Golden Gate Salmon Association

Mono Lake Committee

Natural Resources Defense Council

Pacific Coast Federation of Fishermen’s Associations

Sierra Club California

Southern California Watershed Alliance

The Nature Conservancy

Wholly H2O

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 313

Author:(Gray)

As Amended Ver:April 18, 2017

Majority vote

SUMMARY: Establishes the Water Rights Division within the Office of Administrative Hearings and shifts certain water rights hearing responsibilities to the office. Specifically, this bill:

1. Would, commencing on July 1, 2018, establish a Water Rights Division within the Office of Administrative Hearings (OAH), in the Department of General Services (DGS).
2. Would require a hearing to set administrative civil liability related to water rights, to be held before the division under the existing Administrative Procedure Act rules.
3. Deems a decision made by the administrative law judge in the division to be a recommendation, and not final until accepted by the Executive Director of the State Water Resources Control Board (State Water Board).
4. Would authorize appeal of the Executive Director's decision on the OAH recommendation to the superior court.
5. Would add expenditures of the division to the purposes for which moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

EXISTING LAW:

1. Provides that all water within the state is the property of the people of the state.
2. Provides that the people of the state have a paramount interest in the use of all the water of the state.
3. Provides that the protection of the public interest in the development of the water resources of the state is of vital concern to the people.
4. Establishes the State Water Board consisting of five members appointed by the Governor and subject to confirmation by the Senate. One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights, one shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights, one shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality, and one shall be qualified in the field of water quality. One of the above-appointed persons, in addition to having the specified qualifications, shall be qualified in the field of water supply and water quality relating to irrigated agriculture. One member shall not be required to have specialized experience.
5. Provides for the establishment of a water rights system administered by the State Water Board that entitles a water right holder to use water for beneficial purposes that are non-wasteful.
6. Recognizes two primary forms of water rights:
7. Riparian rights, which are based on applying water from a stream or watercourse to adjoining land; and,
8. Appropriative water rights, which attach when an entity, whether or not it borders a water course, is the first in time to divert the water and use it in a way that is both reasonable and beneficial.
9. Gives the State Water Board authority under emergency conditions when there is prolonged water shortages and/or drought and where water is not available under a diverter’s priority, to curtail diversions.
10. Authorizes the executive director of the State Water Board to issue a complaint to a person who violates certain use and diversion of water provisions.
11. Subjects water rights violators to administrative civil liability.
12. Authorizes the State Water Board to adopt an order setting administrative civil liability based on allegations set forth in the complaint without a hearing, unless a written request for a hearing is received by the board within 20 days after the complaint.
13. Establishes the Office of Administrative Hearings within the Department of General Services as a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Increased annual ongoing costs for the Water Rights Division of approximately $1 million for four Administrative Law Judges and their operating equipment and expenses (GF or Water Rights Fund).
2. Increased Water Rights Division costs for expert witness fees, estimated to be $11,000 per case, or up to $300,000 annually for 2 position years (PYs) (GF or Water Rights Fund).
3. Increased annual SWRCB costs of $150,000 (Water Rights Fund) to prepare for and participate in administrative civil liability and cease and desist order hearings, divided between SWRCB and the Water Rights Division.

COMMENTS: This bill shifts water rights hearings, where an administrative civil penalty is proposed, from the State Water Board to the Department of General Services (DGS) Office of Administrative Hearings (OAH). The bill allows for a final arbiter, State Water Board's Executive Director, to determine if the recommendations of the OAH are acceptable. As is the norm in water quality and water rights cases, final appeal to the superior court is expressly allowed. Funding for the program is provided by the Water Rights Fund which is funded by fees on water rights holders.

Background. Many Entities are Involved in Administering Water Rights. Three main state entities are involved in administering water rights. These three entities cover water quantity and water quality, as both are integrally related to ability to use water successfully. Groundwater is mainly regulated at the local level, with various roles to be played by the state. The three are:

1. State Water Board: Permits and enforces surface water rights and can declare watercourses fully appropriated. Regulates surface and groundwater quality.
2. Department of Water Resources: Administers the Watermaster Program to ensure that water is allocated according to established water rights for certain court-adjudicated areas. Holds water rights on behalf of the state and manages certain drought-related activities including banking and water transfers.
3. Department of Fish and Wildlife: Recommends the amounts of water necessary for instream flows, wetlands, and fish and wildlife resources for water rights proceedings.

Water Rights Program Overview. The State Water Board's water rights program is responsible for (1) issuing new water rights for water bodies that have not already been fully "allocated" to water rights holders, (2) approving changes to existing water rights (this may be to facilitate a water transfer), and (3) conducting ongoing enforcement and compliance monitoring of water rights under its jurisdiction.

Water Rights Permitting Process. The water rights permits issued by the board specify the purpose of use, point of diversion, quantity, and other conditions that protect prior water rights holders, the public interest, and the environment. As part of the permit issuance process, the board publicly notices the permit application, allows for public comment, and conducts various environmental reviews as required by statute, including the California Environmental Quality Act (CEQA). Other state agencies, including the Department of Fish and Game (DFG), may also be involved in the environmental review process for water rights.

Water Rights Licensing and Ongoing Enforcement Activities. After a water right has been granted, and the terms of the permit have been established, the board will inspect the water project. Before a project can be licensed, all of the terms of the permit must be met and the largest volume of water under the permit must be put to beneficial use. This license represents the final confirmation of the water right and remains effective as long as its conditions are fulfilled and the water diverted continues to be used for a beneficial non-wasteful purpose. The board has authority to enforce the conditions of permits and licenses, and it does so by conducting inspections and investigating complaints about the water use behavior of water rights holders. This enforcement authority may be used during times of curtailment, as in the recent drought.

Little Hoover Commission Report (2010). In 2010, the Little Hoover Commission (LHC) issued a report that focused on the governance structure related to the state’s water management, and the number of entities that regulate water. They spent time looking at the interaction between water supply and water rights, ultimately recommending that a new Department of Water Management be responsible for the accounting and administration of water rights, including enforcement and regulation. They argued that this new entity would provide a better platform for planning, tracking progress on water conservation and efficiency, and would improve the state’s ability to develop incentives to change the way water is used in the state. This follows a recommendation of the LHC in 1965 to consolidate certain functions of the State Water Quality Control Board into the California Water Commission (then and still a unit of the Department of Water Resources). Ultimately the Legislature considered this proposal flawed because it did not afford the appropriate level of weight to water quality in consideration of water rights. For example, with instream flow requirements, water quality impacts of upstream users would have major implications to downstream users—both for environmental and for water supply. The original proposal also did not consider the implications of the state’s ownership of the State Water Project and the challenge of regulating the state’s largest water holding under the same department.

Office of Administrative Hearings Programs and Services. The Office of Administrative Hearings (OAH) is a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division. The OAH General Jurisdiction Division provides hearings, mediations, and alternative dispute resolution services to state and local governmental entities. The majority of hearings conducted are governed by the Administrative Procedure Act (APA); all other hearings, mediations, and alternative dispute resolution services are provided as a result of interagency agreements, using the statutory and regulatory authority of the department, agency or local entity.

Building a Knowledge Base: Department of General Services – Water Rights Expertise. The OAH General Jurisdiction Division currently hears cases related to: Administrative Procedure Act; child support services, developmental services, rehabilitations mediation, teacher dismissal, state hospital; corrections, special education, and other related actions. The hearings are set by completing a set of forms through DGS and a number of notification requirements through the responding board. To date, the OAH has not held hearings related to water rights nor does it have expertise in the arena. This bill affords the new OAH division until July 1, 2018, to come up to speed on water rights law and practice. It also would need to have expertise in the fields of fish and wildlife, instream flow, groundwater (and the Sustainable Groundwater Management Act), and water quality, to name a few.

Final Arbiter – State Water Board Executive Director. This bill affords the final state decision (outside of the judicial system), on the recommendation of the OAH, to a single entity, the Executive Director of the State Water Board. The director is appointed by the State Water Board and is an at-will employee. The director is not confirmed by the Legislature, nor are they appointed by the Governor. This gives the State Water Board, in effect, the final say on any controversial or noncontroversial water rights case. And, as a matter of practice, the Executive Director will likely utilize the expertise of the board's staff to make the final determination.

Moving Away From a Diversity of Opinions and Expertise. Finally, some consideration should be given to the structure of the State Water Board versus the Administrative Law Judge model. Water Code Section 175 describes the diversity of the appointees to the State Water Board – all of whom must follow open meeting act laws. The Legislature provided the diversity of the appointments in order to allow all persons before the board the confidence that no one industry or interest would dominate the board. The five appointees are appointed by the Governor and confirmed by the Senate. Specifically, the appointees must meet the following requirements:

1. One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights;
2. One shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights;
3. One shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality;
4. One shall be qualified in the field of water quality;
5. One of the above-appointed persons, in addition to having the specified qualifications, shall be qualified in the field of water supply and water quality relating to irrigated agriculture; and,
6. One member shall not be required to have specialized experience.
7. The board is required, to the extent possible, to be composed of members from different regions of the state. The members also are appointed to a four-year term under which neither the Governor nor the Legislature can remove a board member. The purpose of this rule is to ensure that no undue influence is provided to any board member. One can ask the question—does the model proposed under this bill provide the same diversity of interest, expertise, and, at the same time, protections from undue influence from any industry or interest?

Analysis Prepared by: Catherine Freeman / W., P., & W. / (916) 319-2096 FN: 0000830

Date of Hearing: May 17, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 313

Author:(Gray) – As Amended Ver:April 18, 2017

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes a Water Rights Division within the Office of Administrative Hearings (OAH) in the Department of General Services (DGS), consisting of no less than four full-time Administrative Law Judges, beginning July 1, 2018. Specifically, this bill:

1. Requires an adjudicative hearing to establish civil penalties related to water rights, to be held before the Water Rights Division under the existing Administrative Procedure Act (APA) rules.
2. Requires the OAH to provide facilities and support personnel for the Water Rights Division.
3. Specifies that a decision made by the administrative law judge is a recommendation that is not final until it is accepted by the Executive Director of the State Water Resources Control Board (SWRCB).
4. Requires the SWRCB Executive Director to make a final decision to accept, modify or reject the recommendation of the Water Rights Division within 30 days, or the recommendation is deemed adopted.
5. Authorizes the appeal of the SWRCB Executive Director’s decision on the Water Rights Division's recommendation to the superior court.
6. Allows monies from the Water Rights Fund to be expended by the Water Rights Division, upon appropriation by the Legislature.

FISCAL EFFECT:

1. Increased annual ongoing costs for the Water Rights Division of approximately $1 million for four Administrative Law Judges and their operating equipment and expenses (GF or Water Rights Fund).
2. Increased Water Rights Division costs for expert witness fees, estimated to be $11,000 per case, or up to $300,000 annually for 2 PYs (GF or Water Rights Fund).
3. Increased annual SWRCB costs of $150,000 (Water Rights Fund) to prepare for and participate in administrative civil liability and cease and desist order hearings, divided between SWRCB and the Water Rights Division.

COMMENTS:

1. Purpose. According to the author, "Water management at the state level is broken. Anyone who has tried to work with the state on water knows that the left hand doesn’t know what the right hand is doing, conflicts of interest are the norm, and state agencies act as their own prosecution, judge, and jury. The net effect is an ineffective bureaucratic maze which leaves us unable to capitalize on vital opportunities and prioritizes special interests working behind the scenes over good public policy. "
2. Background. Three main state entities are involved in administering water rights. These three entities cover water quantity and water quality, as both are integrally related to ability to use water successfully. Groundwater is mainly regulated at the local level, with various roles to be played by the state. SWRCB permits and enforces surface water rights and can declare watercourses fully appropriated. SWRCB regulates surface and groundwater quality.

The Department of Water Resources (DWR) administers the Watermaster Program to ensure that water is allocated according to established water rights for certain court-adjudicated areas. Holds water rights on behalf of the state and manages certain drought-related activities including banking and water transfers.

The Department of Fish and Wildlife recommends the amounts of water necessary for instream flows, wetlands, and fish and wildlife resources for water rights proceedings.

1. Office of Administrative Hearings Programs and Services. The OAH is a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division. The OAH General Jurisdiction Division provides hearings, mediations, and alternative dispute resolution services to state and local governmental entities. The majority of hearings conducted are governed by APA; all other hearings, mediations, and alternative dispute resolution services are provided as a result of interagency agreements, using the statutory and regulatory authority of the department, agency or local entity.
2. Duplicative Efforts? SWRCB estimates the costs of this bill result from the duplication of staff work to prepare for and participate in administrative civil liability and cease and desist order hearings, which would be divided between the Board and Water Rights Division under this bill. SWRCB anticipates that combined administrative civil liability (ACL) and cease and desist orders (CDO) are likely to become more typical, resulting from failure to comply with measurement and reporting, curtailments, and public trust flows.  The enforcement staff would be required to spend more time preparing for and presenting in duplicative but separate hearings for ACL and CDO hearings, and briefing the Executive Director to make a determination.  Additionally, should there be inconsistent findings for matters heard both by the SWRCB and the Water Rights Division, there may be additional litigation which may not occur under the current system.    

This bill may have the unintended consequence of fragmenting water rights enforcement between two state agencies, resulting in duplication of workload and increased costs to the Water Rights Fund.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: April 25, 2017

ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE

Eduardo Garcia, Chair

ABPCA Bill Id:AB 313 (

Author:Gray) – As Amended Ver:April 18, 2017

SUBJECT: Water Rights

SUMMARY: Establishes the Water Rights Division within the Office of Administrative Hearings and shifts certain water rights hearing responsibilities to the office. Specifically, this bill:

1. Would, commencing on July 1, 2018, establish a Water Rights Division within the Office of Administrative Hearings (OAH), in the Department of General Services (DGS).
2. Would require a hearing to set administrative civil liability related to water rights, to be held before the division under the existing Administrative Procedure Act rules.
3. Deems a decision made by the administrative law judge in the division to be a recommendation, and not final until accepted by the Executive Director of the State Water Resources Control Board (State Water Board).
4. Would authorize appeal of the Executive Director’s decision on the OAH recommendation to the superior court.
5. Would add expenditures of the division to the purposes for which moneys in the Water Rights Fund are available for expenditure, upon appropriation by the Legislature.

EXISTING LAW:

1. Provides that all water within the state is the property of the people of the state.
2. Provides that the people of the state have a paramount interest in the use of all the water of the state.
3. Provides that the protection of the public interest in the development of the water resources of the state is of vital concern to the people.
4. Establishes the State Water Board consisting of five members appointed by the Governor and subject to confirmation by the Senate. One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights, one shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights, one shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality, and one shall be qualified in the field of water quality. One of the above-appointed persons, in addition to having the specified qualifications, shall be qualified in the field of water supply and water quality relating to irrigated agriculture. One member shall not be required to have specialized experience.
5. Provides for the establishment of a water rights system administered by the State Water Board that entitles a water right holder to use water for beneficial purposes that are non-wasteful.
6. Recognizes two primary forms of water rights:
   1. Riparian rights, which are based on applying water from a stream or watercourse to adjoining land; and,
   2. Appropriative water rights, which attach when an entity, whether or not it borders a water course, is the first in time to divert the water and use it in a way that is both reasonable and beneficial.
7. Gives the State Water Board authority under emergency conditions when there is prolonged water shortages and/or drought and where water is not available under a diverter’s priority, to curtail diversions.
8. Authorizes the executive director of the State Water Board to issue a complaint to a person who violates certain use and diversion of water provisions.
9. Subjects water rights violators to administrative civil liability.
10. Authorizes the State Water Board to adopt an order setting administrative civil liability based on allegations set forth in the complaint without a hearing, unless a written request for a hearing is received by the board within 20 days after the complaint.
11. Establishes the Office of Administrative Hearings within the Department of General Services as a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division.

FISCAL EFFECT: Unknown but potentially significant.

COMMENTS: This bill shifts water rights hearings, where an administrative civil penalty is proposed, from the State Water Board to the Department of General Services (DGS) Office of Administrative Hearings (OAH). The bill allows for a final arbiter, State Water Board’s Executive Director, to determine if the recommendations of the OAH are acceptable. As is the norm in water quality and water rights cases, final appeal to the superior court is expressly allowed. Funding for the program is provided by the Water Rights Fund which is funded by fees on water rights holders.

Author’s Statement:

Water management at the state level is broken. Anyone who has tried to work with the state on water knows that the left hand doesn’t know what the right hand is doing, conflicts of interest are the norm, and state agencies act as their own prosecution, judge, and jury. The net effect is an ineffective bureaucratic maze which leaves us unable to capitalize on vital opportunities and prioritizes special interests working behind the scenes over good public policy.

Background. Many Entities are Involved in Administering Water Rights. Three main state entities are involved in administering water rights. These three entities cover water quantity and water quality, as both are integrally related to ability to use water successfully. Groundwater is mainly regulated at the local level, with various roles to be played by the state. The three are:

• State Water Board: Permits and enforces surface water rights and can declare watercourses fully appropriated. Regulates surface and groundwater quality.
• Department of Water Resources: Administers the Watermaster Program to ensure that water is allocated according to established water rights for certain court-adjudicated areas. Holds water rights on behalf of the state and manages certain drought-related activities including banking and water transfers.
• Department of Fish and Wildlife: Recommends the amounts of water necessary for instream flows, wetlands, and fish and wildlife resources for water rights proceedings.

Water Rights Program Overview. The State Water Board's water rights program is responsible for (1) issuing new water rights for water bodies that have not already been fully "allocated" to water rights holders, (2) approving changes to existing water rights (this may be to facilitate a water transfer), and (3) conducting ongoing enforcement and compliance monitoring of water rights under its jurisdiction.

Water Rights Permitting Process. The water rights permits issued by the board specify the purpose of use, point of diversion, quantity, and other conditions that protect prior water rights holders, the public interest, and the environment. As part of the permit issuance process, the board publicly notices the permit application, allows for public comment, and conducts various environmental reviews as required by statute, including the California Environmental Quality Act (CEQA). Other state agencies, including the Department of Fish and Game (DFG), may also be involved in the environmental review process for water rights.

Water Rights Licensing and Ongoing Enforcement Activities. After a water right has been granted, and the terms of the permit have been established, the board will inspect the water project. Before a project can be licensed, all of the terms of the permit must be met and the largest volume of water under the permit must be put to beneficial use. This license represents the final confirmation of the water right and remains effective as long as its conditions are fulfilled and the water diverted continues to be used for a beneficial non-wasteful purpose. The board has authority to enforce the conditions of permits and licenses, and it does so by conducting inspections and investigating complaints about the water use behavior of water rights holders. This enforcement authority may be used during times of curtailment, as in the recent drought.

Little Hoover Commission Report (2010). In 2010, the Little Hoover Commission (LHC) issued a report that focused on the governance structure related to the state’s water management, and the number of entities that regulate water. They spent time looking at the interaction between water supply and water rights, ultimately recommending that a new Department of Water Management be responsible for the accounting and administration of water rights, including enforcement and regulation. They argued that this new entity would provide a better platform for planning, tracking progress on water conservation and efficiency, and would improve the state’s ability to develop incentives to change the way water is used in the state. This follows a recommendation of the LHC in 1965 to consolidate certain functions of the State Water Quality Control Board into the California Water Commission (then and still a unit of the Department of Water Resources). Ultimately the Legislature considered this proposal flawed because it did not afford the appropriate level of weight to water quality in consideration of water rights. For example, with instream flow requirements, water quality impacts of upstream users would have major implications to downstream users—both for environmental and for water supply. The original proposal also did not consider the implications of the state’s ownership of the State Water Project and the challenge of regulating the state’s largest water holding under the same department.

Office of Administrative Hearings Programs and Services. The Office of Administrative Hearings (OAH) is a quasi-judicial tribunal that hears administrative disputes. The OAH is divided into two, statewide divisions: General Jurisdiction Division and the Special Education Division. The OAH General Jurisdiction Division provides hearings, mediations, and alternative dispute resolution services to state and local governmental entities. The majority of hearings conducted are governed by the Administrative Procedure Act (APA); all other hearings, mediations, and alternative dispute resolution services are provided as a result of interagency agreements, using the statutory and regulatory authority of the department, agency or local entity.

Building a Knowledge Base: Department of General Services—Water Rights Expertise. The OAH General Jurisdiction Division currently hears cases related to: Administrative Procedure Act; child support services, developmental services, rehabilitations mediation, teacher dismissal, state hospital; corrections, special education, and other related actions. The hearings are set by completing a set of forms through DGS and a number of notification requirements through the responding board. To date, the OAH has not held hearings related to water rights nor does it have expertise in the arena. This bill affords the new OAH division until July 1, 2018, to come up to speed on water rights law and practice. It also would need to have expertise in the fields of fish and wildlife, instream flow, groundwater (and the Sustainable Groundwater Management Act), and water quality, to name a few.

Final Arbiter—State Water Board Executive Director. This bill affords the final state decision (outside of the judicial system), on the recommendation of the OAH, to a single entity, the Executive Director of the State Water Board. The director is appointed by the State Water Board and is an at-will employee. The director is not confirmed by the Legislature, nor are they appointed by the Governor. This gives the State Water Board, in effect, the final say on any controversial or noncontroversial water rights case. And, as a matter of practice, the Executive Director will likely utilize the expertise of the board’s staff to make the final determination.

Moving Away From a Diversity of Opinions and Expertise. Finally, some consideration should be given to the structure of the State Water Board versus the Administrative Law Judge model. Water Code Section 175 describes the diversity of the appointees to the State Water Board—all of whom must follow open meeting act laws. The Legislature provided the diversity of the appointments in order to allow all persons before the board the confidence that no one industry or interest would dominate the board. The five appointees are appointed by the Governor and confirmed by the Senate. Specifically, the appointees must meet the following requirements:

• One of the members appointed shall be an attorney admitted to practice law in this state who is qualified in the fields of water supply and water rights;
• One shall be a registered civil engineer under the laws of this state who is qualified in the fields of water supply and water rights;
• One shall be a registered professional engineer under the laws of this state who is experienced in sanitary engineering and who is qualified in the field of water quality;
• One shall be qualified in the field of water quality;
• One of the above-appointed persons, in addition to having the specified qualifications, shall be qualified in the field of water supply and water quality relating to irrigated agriculture; and,
• One member shall not be required to have specialized experience.

The board is required, to the extent possible, to be composed of members from different regions of the state. The members also are appointed to four-year term under which neither the Governor nor the Legislature can remove a board member. The purpose of this rule is to ensure that no undue influence is provided to any board member. One can ask the question—does the model proposed under AB 313 provide the same diversity of interest, expertise, and, at the same time, protections from undue influence from any industry or interest?

Arguments in Support. Those in support argue that AB 313 will address issues with, and upgrade the administration, of California’s water rights. They argue that this measure will remove conflicts on interest in the existing system where agencies operate as judge, jury and prosecutor. The bill would move California toward systems held by other western states and would remove some of the quasi-judicial role of the State Water Board.

Arguments in Opposition. Those in opposition argue that, by separating water rights enforcement, the bill would reduce coordination, increase inefficiencies, and undermine the effective enforcement of water rights and environmental protections in California. They argue that the State Water Board’s modern structure has afforded the state broad authority to prevent waste and unreasonable use by all water rights holders, including pre-1914 water rights holders. They argue that the Legislature has affirmed the water rights authority of the board, as recently as 2015 with the Sustainable Groundwater Management Act.

REGISTERED SUPPORT / OPPOSITION:

Support

Agricultural Council of California

Almond Alliance

Association of California Egg Farmers

Byron-Bethany Irrigation District

California Association of Wheat Growers

California Association of Wine Grape Growers

California Bean Shippers

California Cattlemen’s Association

California Citrus Mutual

California Cotton Ginners & Growers Association

California Farm Bureau Federation

California Fresh Fruit Association

California Grain & Feed Association

California League of Food Processors

California Pear Growers Association

California Seed Association

California Warehouse Association

California Wine Institute

San Luis & Delta-Mendota Water Authority

Stockton East Water District

Western Agricultural Processors

Western Growers Association

Westlands Water District

Opposition

Audubon California

California Coastal Protection Network

California League of Conservation Voters

California Water Association

Center for Food Safety

Clean Water Action

Community Water Center

Defenders of Wildlife

Environmental Justice Coalition for Water

Food & Water Watch

Mono Lake Committee

Natural Resources Defense Council

Sierra Club California

Wholly H2O

Analysis Prepared by: Catherine Freeman / W., P., & W. /