HOUSE OF REPRESENTATIVES

H.B. NO.

2164

THIRTY-FIRST LEGISLATURE, 2022

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO DISPOSITION OF WATER LICENSES BY THE BOARD OF LAND AND NATURAL RESOURCES.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  Section 171-58, Hawaii Revised Statutes, is amended to read as follows:

     "§171-58  Minerals and water rights.  (a)  Except as provided in this section the right to any mineral or surface or ground water shall not be included in any lease, agreement, or sale, this right being reserved to the State; provided that the board may make provisions in the lease, agreement, or sale, for the payment of just compensation to the surface owner for improvements taken as a condition precedent to the exercise by the State of any reserved rights to enter, sever, and remove minerals or to capture, divert, or impound water.

     (b)  Disposition of mineral rights shall be in accordance with the laws relating to the disposition of mineral rights enacted or hereafter enacted by the legislature.

     (c)  Disposition [of] for water [rights] may be made by [lease] license at public auction or direct negotiations as provided in this chapter or by permit for temporary use on a month-to-month basis under those conditions [which] that will best serve the interests of the State and subject to a maximum term of one year and other restrictions under the law; provided that [any]:

     (1)  A license for water may be disposed of through direct negotiation, without recourse to public auction, provided that the license rental for water shall be at fair market value determined by independent appraisal.  Prior to approving a direct license, the board shall publish a request for interest and request for qualifications notice inviting persons to express their interest in the license for water and their qualifications as potential licensees.  The notice shall be given at least once statewide and at least once in the county where the land is located and shall contain:

          (A)  The qualifications required of eligible licensees;

          (B)  A general description of the land, water, and any improvements on the land appurtenant to the use of the water;

          (C)  The proposed use and amount of the water to be allowed under the license;

          (D)  The closing date and manner by which a person shall indicate interest and submit a statement of qualifications; and

          (E)  Notice that a current business plan that shall include the proposed use and amount of the water, is a prerequisite to participate at the time of auction or direct negotiation, if applicable, and shall be made a term of the license.

The board shall, in its sole discretion, determine if any persons have qualified under the terms of the request for qualifications and shall notify all persons who expressed interest as to whether they qualified.  If the board determines that there is more than one potential qualified bidder, then the board shall dispose of a license for water by public auction.  The board may dispose of a license for water by direct negotiation, without recourse to public auction, if the board determines there is no more than one potential qualified bidder or if the board finds that a public auction will be contrary to the public interest;

     (2)  In determining the fair market value for the license rental for water, the following factors may be considered where appropriate:

          (A)  The amount of water diverted or extracted and proposed use of water allowed under the license;

          (B)  The amount of water diverted or extracted in proportion to the amount of water available from the surface or ground water source;

          (C)  The costs of delivery;

          (D)  The avoided cost to the licensee of obtaining the water from practicable alternative sources;

          (E)  The net economic benefit to the licensee;

          (F)  The value contributed by the licensee for watershed management pursuant to subsection (e); and

          (G)  The rent charged for a revocable permit for the disposition that is the subject of the license;

     (3)  If the licensee does not agree with the fair market value, the board shall have sole discretion to resolve the dispute, provided such resolution is consistent with the public trust doctrine;

     (4)  Any disposition by [lease] license for water shall be subject to disapproval by the legislature by two-thirds vote of either the senate or the house of representatives or by majority vote of both in any regular or special session next following the date of disposition; [provided further that after] and

     (5)  After a certain land or water use has been authorized by the board subsequent to public hearings and conservation district use application approval, and [environmental impact statement approvals,] is in compliance with chapter 343, water used in nonpolluting ways, for nonconsumptive purposes because it is returned to the same stream or other body of water from which it was drawn, and essentially not affecting the volume and quality of water or biota in the stream or other body of water, may also be [leased] licensed by the board with the prior approval of the governor and the prior authorization of the legislature by concurrent resolution.

     (d)  Any [lease of] license for water [rights] shall contain a covenant on the part of the [lessee] licensee that the [lessee] licensee shall provide from waters [leased] licensed from the State under the [lease] license or from any water sources privately owned by the [lessee] licensee to any farmer

or rancher engaged in irrigated pasture operations, crop farming, pen feeding operations, or raising of grain and forage crops, or for those public uses and purposes as may be determined by the board, at the same rental price paid under the [lease,] license, plus the proportionate actual costs, as determined by the board, to make these waters available, so much of the waters as are determined by the board to be surplus to the [lessee's] licensee's needs and for that minimum period as the board shall accordingly determine; provided that in lieu of payment for those waters as the State may take for public uses and purposes the board may elect to reduce the rental price under the [lease of] license for water [rights] in proportion to the value of the waters and the proportionate actual costs of making the waters available.  [Subject to the applicable provisions of section 171-37(3), the] The board, at any time during the term of the [lease of] license for water [rights], may withdraw from waters [leased] licensed from the State and from sources privately owned by the [lessee] licensee so much water as it may deem necessary to (1) preserve human life and (2) preserve animal life, in that order of priority; and that from waters [leased] licensed from the State, the board, at any time during the term of the [lease of] license for water [rights], may also withdraw so much water as it may deem necessary to preserve crops; provided that payment for the waters shall be made in the same manner as provided in this section.

     (e)  Any new [lease of] license for water [rights] shall [contain a covenant that requires] require the [lessee] licensee and the department [of land and natural resources] to jointly develop and implement a watershed management plan[.] that prioritizes the availability of water resources from forested watersheds.  The board shall not [approve] issue any new [lease of] license for water [rights] without [the foregoing covenant or] a watershed management plan[.] and a commitment from the licensee to assist in implementation of the watershed management plan.  The board shall prescribe the minimum content of a watershed management plan[;] developed pursuant to this section; provided that the watershed management plan shall require the prevention of the degradation of [surface water and ground water quality] water resources from forested watersheds to the extent that degradation can be avoided using reasonable management practices.

     (f)  [Upon renewal, any lease of water rights shall contain a covenant that requires the lessee and the department of land and natural resources to jointly develop and implement a watershed management plan.  The board shall not renew any lease of water rights without the foregoing covenant or a watershed management plan.  The board shall prescribe the minimum content of a watershed management plan; provided that the watershed management plan shall require the prevention of the degradation of surface water and ground water quality to the extent that degradation can be avoided using reasonable management practices.] The board shall consult with the commission on water resource management to determine whether the proposed disposition is consistent with chapter 174C.

     (g)  The department [of land and natural resources] shall notify the department of Hawaiian home lands of its intent to execute any new [lease, or to renew any existing lease of water rights.] license for water.  After consultation with affected beneficiaries, these departments shall jointly develop a reservation of water rights sufficient to support current and future homestead needs.  Any [lease of] license for water [rights or renewal] shall be subject to the rights of the department of Hawaiian home lands as provided by section 221 of the Hawaiian Homes Commission Act.

     (h)  The initial term for a license for water shall not exceed fifty-five years.  The board may extend the term of the license to the extent necessary to qualify the lessee for any state or private lending institution loan, private loan guaranteed by the State, or any loan in which the State and any private lender participates, or to amortize the cost of substantial improvements to the premises benefitting from the license of water that are paid for by the lessee without institutional financing, provided that the aggregate of the initial term and any extension granted shall not exceed sixty-five years and, after consultation with the commission on water resource management, the proposed extension is consistent with chapter 174C.  Notwithstanding section 171-22, the board or the chairperson shall not consent to the mortgage of, or the creation of a security interest in, a license of water.

     (i)  A public auction shall not be required for a license for the instream, in-watershed use of water for wetland kalo cultivation done in a traditional manner.

     (j)  Prior to the board's approval of a proposed water

license by direct negotiation or public auction, the department shall provide public notice of the proposed license agreement by posting on the websites of the department and the office of the lieutenant governor.  The notice shall also be mailed or electronically delivered to all persons who have made a timely written request of the department for notice of water license proposals; the commission on water resource management; the department of Hawaiian home lands; and the office of Hawaiian affairs.  The notice shall provide the opportunity to submit comments in writing to the department regarding the proposed water license for a period of no less than thirty days following the date of publication.  Comments received shall be submitted to the board with the board's consideration of the proposed water license.  The public notice shall include the identity of the licensee, if the license is to be disposed of by direct negotiation, and the location and description of the licensed water source, and shall include information regarding how a copy of the proposed license or draft staff submittal containing the essential terms and conditions of the proposed license to be presented to the board can be obtained or inspected.  The notice shall also include:

     (1)  The length of the license agreement and license rental for a directly negotiated license, or the upset price if the license is to be disposed of by public auction, as appraised pursuant to paragraph (c)(2) and section 171-17;

     (2)  The amount of water intended to be diverted or extracted, the proposed use of water allowed under the license, and the amount of water available from the surface or ground water source;

     (3)  The known stream flow data of each stream to be affected by the license and the interim or permanent instream flow standard;

     (4)  Information regarding how water diversion or extraction and use will be monitored by the department or a third party for compliance with license terms, or a statement that compliance will not be monitored; and

     (5)  A description of how the public can view any hydrologic, ethnographic, environmental review, and any other reports used in the development of the proposed license."

     SECTION 2.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings pursuant to chapter 91 that were begun before its effective date.

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect upon its approval.

 

INTRODUCED BY:

_____________________________

 

 

BY REQUEST

 

 

Report Title:

Water License

 

Description:

Clarifies the conditions and manner in which the Board of Land and Natural Resources may dispose of water by license.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.