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CHARLOTTE COUNTY v. SOUTHWEST FLORIDA WATER MANAGEMENT DISTRICT
V. Reallocation within the SWUCA - Proposed Rules 40D-2.331(3) and 40D-2.801(3)(b)7. 545. Under the District's existing WUP rules, permitted groundwater quantities can only be transferred to a new location in very limited circumstances. See, Rule 40D-2.351, F.A.C. If the request for a transfer includes a proposal for a change in the terms or conditions of the permit (other than a name change,) then an application for modification rather than a request for a transfer must be submitted. Moreover, a transfer request that includes a proposal for a change in water use classification must be submitted in an application for a new permit rather than in a request for a transfer.87 The SWUCA Rules represent a significant change in approach and philosophy. 546. Because some concentrated areas of withdrawals have developed which are a source of concern -- particularly where the withdrawals are occurring near the coast and other sensitive areas -- the District has concluded that some regulatory strategies are necessary to relieve that stress. The reallocation provisions would allow the transfer of existing permitted quantities in the SWUCA to different locations and different uses. A potential new user would be able to obtain a permit for groundwater in the SWUCA by negotiating a reallocation with an existing permit holder provided the new withdrawal complies with the District's existing permitting rules. The District claims that its proposal will facilitate the redistribution of existing withdrawals away from the coastal zone and away from the Highlands Ridge so that the localized effect of the individual withdrawals would be shifted to areas that can more readily handle the impact without adverse consequences. 547. In developing a strategy to deal with the stressed conditions of the groundwater resources in the SWUCA, the District considered several different approaches including an across the board reduction in quantities for all permittees and/or a drastic reduction in pumping in certain areas. The District was concerned about the socio-economic impacts of those options and concluded that its goals could be accomplished by capping new withdrawals and incentives for the redistribution of existing withdrawals. 548. The SWUCA Management Plan analyzed several possible redistribution mechanisms and indicated that they should be encouraged to move water among water users. See, SWUCA Management Plan pp. 65-72. However, reallocation was the only specific redistribution strategy included in the SWUCA Rules. 549. The District has cited three goals for the reallocation rules: (1) to provide an opportunity for new uses and thus economic growth within the SWUCA which would otherwise be limited due to the restrictions on permitting new quantities from the Floridan aquifer; (2) to provide a mechanism to facilitate the redistribution of withdrawals away from the coast thus promoting increases in the potentiometric surface in the areas most vulnerable to impacts from saltwater intrusion; and (3) to reduce the amount of permitted quantities within the SWUCA. B. The Proposed Reallocation Process 550. Under the SWUCA Rules, a reallocation would be authorized when: a) the reallocated quantities are eliminated from the source permit; b) historically unused quantities in the original or source permit are eliminated; c) the remaining permitted quantities in the original or source permit are modified to reflected highest efficiency designated for the type of use as set forth in the rules; d) the quantity to be reallocated has been used prior to January 1, 1993 and after December 31, 1987; e) the withdrawals at the new site which is to receive the reallocated water meets the Conditions for Issuance for a new permit; f) the new permit, if any, resulting from the reallocation reflects the highest efficiency designated for the use; and g) the quantity to be reallocated is equal to or less than the quantity being reduced in the original or source permit. 551. A reallocation permit would not be subject to the minimum level or any other SWUCA regional cumulative impact analysis. According to the District, this policy is reflected in proposed BOR Section 4.3, which provides that the minimum level restrictions are applicable to "new groundwater quantities." Similarly, proposed Rule 40D-8.628(1) provides that "permitted withdrawals from the upper Floridan aquifer will not be considered to be in violation of this level." Reallocation quantities would be considered quantities that have already been permitted and are simply being moved from one location to another. Thus, they would not be considered new quantities for purposes of the SWUCA minimum level. This approach is reflected in proposed Rule 40D-2.301(2), which includes reallocation permits among the categories of permits that are "determined" to meet the conditions for issuance on a regional cumulative basis so long as they "meet or do not exceed the criteria set forth in the Basis of Review." The practical result of these somewhat obtuse provisions is that, while the minimum level and regional saltwater intrusion criteria would not be applied to a new permittee receiving a reallocated quantity, such a permittee would be required to demonstrate compliance with the Conditions for Issuance as applied through the Basis of Review. 552. The source permit would continue as modified for the original permit duration. The new permit for the reallocated quantity would be issued for a duration in accordance with the proposed SWUCA Rules for new permits. 553. The District states that any new reallocated permit would be subject to third party challenges the same as any new permit, with the exception that the reallocated quantity would not be considered to be a new quantity that is subject to the minimum level provisions of the proposed rules. 554. The District views reallocation as a modification of the source permit, so the reallocated quantity would not be subject to the competing applications procedure. 555. Proposed Rule 40D-2.801(3)(b)7 would create three reallocation zones within the SWUCA which are depicted in Figure 1-1 to be included in the Basis of Review. By splitting the SWUCA into three reallocation zones, the District seeks to manage water use permit transfers so as to minimize their effect on natural resources. 556. The zones are: (1) the Most Impacted Area (MIA); (2) the Stressed Area-Moderate (SAM); and (3) the Stressed Area-Least (SAL). The reallocation zone designations are intended to reflect the degree to which groundwater and surface water resources are stressed as a result of groundwater pumping. The MIA corresponds to the MIA designated in 1992 as part of the ETB WUCA. See, BOR Section 7.2.8.A. The SAM represents the area where the composite of the annual average potentiometric surface for 1988 through 1992 reflected a drawdown of 30 feet or more in comparison with pre-development conditions. In addition, the HR WUCA was included in the SAM due to concern about declining lake levels. Along the coast, the SAM encompasses the area where total dissolved solids in the UFAS exceed 1,000 mg/liter. 557. Under Proposed Rule 40D-2.331(3)(a), reallocation of permitted withdrawals from the Floridan Aquifer within the SWUCA would be allowed from a withdrawal point in the MIA to any other reallocation zone. Reallocations would not be allowed from any point outside the MIA to a point within the MIA. 558. Rule 40D-2.331(3)(b) provides that when a reallocation is from a withdrawal point (1) in the MIA to a withdrawal point in the MIA, the SAM, or the SAL, or (2) in the SAM to a withdrawal point in the SAM or the SAL, or (3) in the SAL to a withdrawal point in the SAM, historically unused quantities in the source permit are eliminated from the permit prior to reallocation. Subsection (c) of this proposal provides that when a reallocation is from a withdrawal point in the SAL to a withdrawal point in the SAL, unused quantities are not eliminated from the permit prior to reallocation. 2. Historically Unused Quantities 559. Historically unused quantities are calculated based on the highest quantities used during the period from January 1, 1988, to September 30, 1994. Thus, while Rule 40D-2.331(3)(b) would not allow reallocations of the full permitted amount from the MIA and the SAM, it does allow reallocation of the highest historic use during the window period. The District asserts it would not allow a quantity that exceeds efficiency standards to be reallocated. 560. Some parties have objected because historically unused quantities is not defined in the proposed rules. The District responds that the term simply means those permitted quantities that were not used. 561. Determining historically unused quantities can be an elusive task, particularly since not all water use is metered. At the hearing, District witnesses testified that metered data would be used if available. If not, the best alternate means available such as crop reports, aerial photographs, county tax records and Florida Agricultural Statistical Service data for agricultural permittees would be used. Similar approaches would be used for other types of use. While the proposed rules do not specify exactly how historically unused quantities will be calculated, this term is not unacceptably vague. The determination can and should be made on a case-by-case basis. 562. Proposed Rule 40D-2.331(3)(b)2, F.A.C., provides that the quantity that could be reallocated would be based upon the annual average and peak month quantity for any year selected by the applicant between the reallocation window period of January 1, 1988, through September 30, 1994, but the permittee could not select the highest peak month from one year and the highest annual average from a different year. 563. A cut-off date prior to rule adoption was included to prevent permittees from increasing their use after the rules go into effect in order to have a higher quantity available for reallocation. The District chose not to measure quantities based on a calendar year because of concerns that it may not be appropriate for some uses, such as agricultural users who sometimes grow crops that extend from one calendar year to the next. 564. Decline in head pressure at the coast is the primary cause of saltwater intrusion in the UFAS. The decline at any particular location in the SWUCA is a function of both the local and regional influences. The distribution of withdrawals within the SWUCA can effect the impact to the resource. Thus, a redistribution of withdrawals in a manner that raises the potentiometric level at the coast will help inhibit the movement of the saltwater interface even though overall regional conditions will be an interrelated factor. 565. While the District's studies in particular the ETB WRAP, confirm that safe yield for the groundwater basin is a function of both the amount pumped and the distribution of the pumpage, it does not appear that redistribution will significantly increase the amount that can be safely pumped from the SWUCA. The District has run hypothetical scenarios with the ETB WRAP Model to assess how a redistribution of pumpage would affect the potentiometric surface. These modeling efforts confirm in a qualitative sense that reallocation would provide a net benefit to the environment by increasing water levels within the most vulnerable areas, but they do not provide a basis for concluding that any new quantities would be available. 566. The District has not run any redistribution scenarios with its regional groundwater flow model that seek to maximize groundwater pumpage in the SWUCA while at the same time increasing the potentiometric level at the coast. The redistribution scenarios that have been run project the minimum level being exceeded at the coast when pumpage was increased in the inland counties by more than 15 million gallons per day above the 1991 estimated levels (650 MGD). As a result, the only real opportunity provided by the reallocation provisions for new users in the inland counties to access the UFAS will come through a private market purchase of a reallocation right. 567. Rather than try to implement an optimal distribution scheme, the District has chosen to protect the existing pumpage distribution in its method of applying the minimum level while attempting to create incentives for redistribution through its reallocation rule. The District points out that its EIS concluded that reallocation could be helpful in reducing the economic impacts of pumping reductions on inland counties which have not grown as rapidly as communities along the coast. The proposed reallocation program represents an unprecedented approach to water regulation that could minimize economic disruption to some existing users. However, the proposed reallocation program involves novel concepts that cannot be reconciled with the existing statutory framework. 568. As discussed in Section IV B above, upon adoption of the SWUCA Rules, no new water withdrawals would be approved in the SWUCA until the minimum levels are met in each of the three designated areas based on a running five-year average. There was testimony that if the entire proposed SWUCA regulatory program is adopted, including the efficiency requirements and incentives for alternate sources, the minimum level in all three of the areas could be achieved within 10 years. However, even if this estimate is accepted, it appears that it will be substantially longer before any new uses will be permitted because of the manner in which the District would model proposed new uses. See, Section IV B above. In any event, the SWUCA Rules do not set a deadline by which the minimum level must be met. In the meantime, potential new users will be essentially denied access to the resource while existing permits are renewed. 569. The District contends that potential new users of water in the SWUCA are afforded an adequate opportunity to utilize the resource via the reallocation process and that reallocation, as well as the separate provisions providing for groundwater withdrawal credits, mitigate against the effects of limiting new quantities. 570. The District acknowledges that the limitation on new permits could cause significant economic hardship for the inland communities, many of which do not have access to central sewer systems and the opportunity for reclaimed water supplies or surface supplies from stream flow and where the surficial aquifer is not very productive. In an attempt to alleviate this hardship, proposed Rule 40D-2.331(3) would allow the entire permitted quantity to be reallocated within the SAL. The District claims this provision will address the economic concerns and enhance the opportunity for future growth within the inland counties or inland communities which have limited options available to gain new water sources. While this provision may to some extent increase the quantities available for reallocation in the inland counties, it is impossible to predict how much water will be available and at what price. In effect, this approach presumes an existing user has a priority right to renew a permit to utilize a public resource and sell it to the highest bidder. As discussed in the Conclusions of Law, this concept is not specifically recognized in Chapter 373 and cannot be reconciled with the public policy embodied in that statute that water is a public resource as opposed to a private resource. 571. In developing the proposed reallocation rules, the District sought input from experts across the country regarding water allocation strategies and the marketing and pricing of water. Reallocation was also discussed extensively during the Work Group process. The District's claim that reallocation is popular among members of the regulated public who do not presently have a permit because it provides them with another opportunity to obtain additional water when alternative sources are not available, does not overcome the current lack of legislative authority for this process. 572. In response to the contention that reallocation creates a private property right in a public resource, the District claims that a private market already exists in permitted water rights, as reflected in the higher land values associated with properties that have a water use permit. The District denies that reallocation creates the type of private water right that exists under western water law. As discussed in the Conclusions of Law, while the rights granted under the proposed reallocation program are not as broad as the rights recognized in some other states, they are broader than previously recognized in Florida law and cannot be created without specific legislative authority. 573. The District contends that, since reallocation quantities will still be regulated, subject to competing applications upon renewal, and subject to reductions in permitted quantities upon renewal, there are adequate protections to insure that all uses meet the statutory three-prong test. However, Chapter 373 requires the establishment of a regulatory scheme that provides flexibility to allocate water in places and times of limited supply to those uses that are most "in the public interest." Potential new uses cannot unilaterally be precluded from accessing a limited public resource without a reasonable and fair opportunity to demonstrate that the public interest would be better served if the new use was permitted. 574. While the District believes the proposed reallocation rules, in conjunction with other District rules, provide the appropriate mix between the extremes of western water law and a heavily regulated marketplace, this policy choice can not be reconciled with the current statutory framework, especially when considered in the context of the preferential treatment accorded in the SWUCA Rules to the renewal of existing permits. E. Effect on Actual Use and Permitted Quantities 575. By allowing the reallocation of quantities equal to the highest historical use, even though that quantity may not have been used on a regular basis, the District has created a regulatory scheme that could potentially provide incentives for the utilization of a higher percentage of permitted use in the SWUCA. For example, the District could allow the reallocation of a quantity from the MIA equal to the highest historical use over the proceeding 5 years even though that quantity may not have been utilized during most of that period. The reallocation might be to a user who is more likely to utilize the entire reallocated quantity on a full-time basis. Thus, theoretically, reallocation of individual highest historic uses from the specified period could increase use beyond the highest annual average use of any single year in the window period. 576. The District believes it is unlikely that there will be a combination of actual use during the reallocation window period that will exceed 1989 usage, which was the highest usage of record. According to the District, in 1989 a large number of permittees pumped their highest use quantities ever. The District believes the market forces which drove 1989 usage are unlikely to reoccur and points out that overall usage has declined since 1989. 577. The District minimizes the possibility that the reallocation program, could lead to increased overall withdrawals. The District believes that, because of the costs of reallocating water for various user groups, reallocation would be used very sparingly throughout the SWUCA for the foreseeable future and that the potential for increased overall usage is minimal. The District feels that it has adequate monitoring provisions built into the SWUCA Rules to detect any such development before it becomes a problem. 578. Once limitations are placed on acquiring new groundwater permits in the SWUCA, there will be added pressure for actual groundwater use to approach permitted quantities. In an attempt to guard against this occurring, the District notes that the proposed rules provide for an investigation if a particular water use category shows a significant increase after reallocation is allowed. See, proposed Rule 40D-2.801(3)(B)6. The specifics of this provision and the challenges to it are discussed in Section IV G above. It is expected that the monitoring provisions will provide an early alert to the District if the reallocation program results in actual use more closely approximating permitted quantities. 579. The District has not conducted a formal study to determine the amount of water that would be available through reallocation. The District says it has studied the macroeconomics of the area, including the growth patterns of all user groups to assess which ones were likely to reallocate water. 580. According to the District, the groups unlikely to reallocate (public supply, recreational golf courses, citrus and mining) represent about 70 percent of the permitted quantities within the SWUCA. Public supply was considered least likely to reallocate due to the extremely high opportunity costs associated with reducing population growth. Recreational golf courses were considered next least likely because they do not have the ability to reduce usage and still have an operational facility. Citrus, which represents about 80 percent of the permits in the SWUCA, was considered next least likely because citrus is a long-term crop that cannot be adjusted as to acreage on a seasonal basis and generally grows into the full permitted quantity very quickly. 581. The District anticipates the mining industry may be a potential user of reallocation because its need for water fluctuates based upon market conditions. Reallocation is also a possible means of moving allocated quantities between mining operations. However, the District believes that, because the mining companies have invested in land and mineral rights in advance and cannot recoup this investment without water supply, there will not be extensive reallocation. In addition, mining land is often reclaimed to agricultural use, which requires water. 582. Reallocation is also considered a possibility for row crop users which have historically used quantities, as defined in the proposed rules, that are higher than what is utilized on an average basis. However, because these operations typically depend upon the years in which they plant high acreages to finance capital improvements, the District does not anticipate extensive reallocation. 583. The District expects the most likely type of permit to be reallocated is pasture land. At the hearing, the District estimated the portion of the water allocated within the SWUCA to pasture land was no more than five percent. 584. The District believes the most likely candidates to pay the cost for reallocated water would be public suppliers within the inland communities, power plants that are facing permitting obstacles along the coast, and high end industrial or developmental activities. 585. Obviously, an increase in actual water use would occur if reallocation is utilized to a greater extent than anticipated. The District states that it does not anticipate reallocation leading to increased use in the absence of a specific need. The District's 1992 Needs and Sources Report would seem to indicate that there will be significant pent-up demand for water in the SWUCA if groundwater withdrawals are capped. However, the District's witnesses suggested the Needs and Sources Study is "conservative" in the sense that it tends to overestimate demand in order to ensure available supplies.88 Thus, they do not believe any conclusions should be drawn as to how much the reallocation program would be used. According to the District, there has actually been a recent downturn in the growth of water use, particularly in citrus and row crops, that is not reflected in the Needs and Sources Study. No specific evidence was presented as to any new and/or reduced overall demand projections for the SWUCA. 586. In view of the conclusions reached herein regarding the lack of statutory authority to implement a reallocation program as currently proposed, this discussion as to whether reallocation will lead to an increase in actual use is moot. Because of the uncertainty in this area and the potential implications of the proposed program, this discussion has been included to highlight certain important policy issues that were addressed extensively by the parties. In sum, there are certain important policy aspects to the proposed reallocation program that potentially create incentives and opportunity to increase actual water use in the SWUCA contrary to the stated goals of the proposed rules. Ultimately, the extent to which reallocation occurs will depend upon the law of supply and demand. The District acknowledges that it is difficult to predict the extent to which the reallocation provisions will be utilized and that it is theoretically possible that actual usage could increase under the program. Nonetheless, the District argues that deference should be accorded to its experience and judgment regarding the forces which drive water use within the SWUCA in assessing whether there will be an increase in actual usage. The potential for increased uses is not itself a basis to invalidate the proposed program. The evidence did not establish that the District's conclusions regarding the effect of the reallocation program on actual water use were arbitrary and/or capricious. F. Reallocation of Water-Banked Quantities 587. ECOSWF argues that the proposed reallocation program should be invalidated because it allows for the transfer of quantities currently permitted for pastureland even though those quantities may not represent a reasonable-beneficial use. The District acknowledges that, while its rules were not intended to permit irrigated pasture to be used to "bank water", some currently permitted pasture land has been so used.89 588. The District notes that the SWUCA Rules would eliminate allocations for unimproved pasture and would immediately reduce improved pasture permits to those quantities necessary for drought protection. More specifically, proposed Rule 40D-2.801(3)(b)(4) would standardize pasture irrigation in the non-WUCA SWUCA. The net effect would be to reduce permitted pasture quantities in this area. The District claims this reduction would be about 60 percent, however, the evidence was confusing and inconclusive as to the exact amount.90 In the portions of the SWUCA that are presently within a WUCA, the reduction may be less because these areas have been permitted since the early 1990s based upon rainfall amounts and monthly quantities that are close to the proposed SWUCA standards. 589. Even with the reductions, there would still be significant quantities of pastureland available for reallocation. Within Hardee and DeSoto counties, which comprise the majority of the SAL, there are approximately 40 MGD of permitted pastureland quantities available for reallocation. Rule 40D-2.331(3)(c) would allow reallocation within the SAL of all or most of this permitted pasture irrigation quantity91, including water banked quantities, at a time when new applicants are not being considered and do not have an opportunity to demonstrate that their proposed use is more in the public interest.
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