The Water Banking Act (Utah Code 73-31) promotes temporary, voluntary and locally directed leasing arrangements for the use of water rights. Leasing arrangements retain local ownership of water rights, create income and provide expanded water access.

The act provides water users ultimate flexibility to design a leasing arrangement that meets local conditions. Local water users can determine the size and scale of a bank’s service area, which water rights participate, lease prices, lease terms, conditions for leasing, distribution of proceeds, etc..

• Streamlined administrative process: Once water rights are approved to be deposited in a water bank, no additional change applications or state approvals are needed to move water to a new use within the approved service area. This is intended to facilitate quicker and cheaper movement of water on a temporary basis.
• Forfeiture: Water rights approved to be deposited in a water bank are exempt from beneficial use requirements and protected from forfeiture.
• Environmental/Instream-Flows: Banked water can be leased for any purpose authorized by the act, including instream flows.
• Condemnation Protections:  Banked water is shielded from any condemnation procedures while in the bank and for a period of time afterwards.

Yes, though not termed “water banking.” There are already a few informal efforts around Utah that are similar to water banking. The legislation would not affect those efforts. It would, however, create a 10-year pilot program that would establish a statutory framework. The framework would give water right holders the option of creating and operating their own water banks. The banks would be subject to public notice and comment, oversight from the Board of Water Resources and coordination with the State Engineer.

Water right holders would retain ownership of their water rights. The rights would revert to their prior “heretofore” use when withdrawn from the bank without the need for a change application. Water rights deposited within a bank would also not be subject to abandonment and forfeiture for the period of time the State Engineer authorizes them to be used within a bank.

The decision to create, or participate in, a water bank would be entirely voluntary and would be made at the local level. The banks would be locally managed. Only a record holder of a perfected water right may request approval for a statutory water bank and designate the service area of a water bank. No banks would be managed at the state level.

• Contract:
  • Many water users already have leases arranged by contract.
  • A contract water bank would apply in those cases or where a review of local conditions shows the desired water market activity is best managed through a contract.
  • A contract water bank seeks approval to utilize a specific water transfer contract consistent with the terms of a water bank and with the flexibility provided by the act.
  • A contract water bank application asks water users to submit general information about the contract and a copy of the contract.
  • The applicant for a contract water bank must be a non-federal public entity to prevent private water speculation: other parties to the contract do not need to be public entities.
• Statutory:
  • A statutory bank is a legal entity organized for the purpose of administering leasing activity between parties in a defined area.
  • Statutory water banks are modeled after private irrigation companies and run on private governance documents such as articles, bylaws, and policy documents.
  • A statutory water bank seeks approval to develop new and unspecified water lease agreements under a locally managed water bank.
  • A statutory water bank application requires that the applicant demonstrate they have addressed a number issues needed for prudent management and leasing of water.
  • The applicant of a statutory bank must be the owner of a perfected water right and participation is open to all interested water users.

No. Water right holders seeking to move a water right into a bank would go through the same change application process that applies to all water rights. This means the State Engineer would review all applications that seek to place a water right into a bank to ensure that they do not impair other rights. It also means that the existing limitations on out-of-basin transfers would apply.

After the State Engineer approves a right for use within a bank, the right could be used for a specified period of time within the bank’s service area for other uses without the need for another change application. This, of course, would be subject to any limitations imposed by the State Engineer.

As a pilot program, every bank would submit an annual report to the Board of Water Resources. At the end of the pilot program, the board would report on the effectiveness of the water banking program to the Legislature. The Legislature would then determine whether to continue the program, modify it, or allow it to terminate.

Because this program is intended to be a pilot program, the draft legislation is intended to keep it as simple as possible to limit the potential for unintended consequences and to make it easier to study the effectiveness of the program.

Water banking is one kind of water marketing tool. Water marketing strategies resources, such as the Foundational Questions Document, will help guide local water users through the key water marketing milestones needed to understand and assess water marketing potential in the area. The Water Marketing Methods and Water Marketing Transaction Types documents will help water users understand how best to structure a water transaction that fits their local needs. If creating a water bank under the Water Banking Act seems like the best fit, the application resources give further guidance on how to create and apply to be a Utah Water Bank.