Toledo Bend
Bi-State
Alliance

S.B. No. 1

AN ACT

relating to the development and management of the water resources of the state; providing penalties.

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

ARTICLE 1. WATER PLANNING: DROUGHT, CONSERVATION,

DEVELOPMENT, AND MANAGEMENT

SECTION 1.01.  Section 16.051, Water Code, is amended to read as follows:

Sec. 16.051.  STATE WATER PLAN:  DROUGHT, CONSERVATION, DEVELOPMENT, AND MANAGEMENT; EFFECT OF PLAN. (a)  No later than September 1, 2001, and every five years thereafter, the board [The executive administrator] shall adopt [prepare, develop, and formulate] a comprehensive state water plan that incorporates the regional water plans approved under Section 16.053 of this code. The state water plan shall provide for the orderly development, management, and conservation of water resources and preparation for and response to drought conditions, in order that sufficient water will be available at a reasonable cost to ensure public health, safety, and welfare; further economic development; and protect the agricultural and natural resources of the entire state.

(b)  The state water plan, as formally adopted by the board, shall be a guide to state water policy. The commission shall take the plan into consideration in matters coming before it.

(c)  The board by rule [plan] shall define and designate river basins and watersheds.

(h)  The board, the commission, or the Parks and Wildlife Department or a political subdivision affected by an action taken in violation of Subsection (g) of this section may bring a cause of action to remedy or prevent the violation. A cause of action brought under this subsection must be filed in a district court in Travis County or in the county in which the action is proposed or occurring. [(c)  The executive administrator shall be governed in his preparation of the plan by a regard for the public interest of the entire state. The executive administrator shall direct his efforts toward the orderly development and management of water resources in order that sufficient water will be available at a reasonable cost to further the economic development of the entire state.

[(d)  The executive administrator shall also give consideration in the plan to the effect of upstream development on the bays, estuaries, and arms of the Gulf of Mexico and to the effect of the plan on navigation.]

SECTION 1.02.  Sections 16.053 through 16.057, Water Code, are amended to read as follows:

Sec. 16.053.  REGIONAL WATER PLANS. (a)  The regional water planning group in each regional water planning area shall prepare a regional water plan, using an existing state water plan identified in Section 16.051 of this code and local water plans prepared under Section 16.054 of this code as a guide, if present, that provides for the orderly development, management, and conservation of water resources and preparation for and response to drought conditions in order that sufficient water will be available at a reasonable cost to ensure public health, safety, and welfare; further economic development; and protect the agricultural and natural resources of that particular region.

(k)  The board may waive the requirements of Subsection (j) of this section if the board determines that conditions warrant the waiver. [HEARING ON PRELIMINARY PLAN. (a)  After the executive administrator completes his preliminary planning of the water resources development within a river basin, he shall hold a public hearing, after notice, at some central location within the river basin. If the proposed plan involves the transfer of water from one basin to another, the hearing shall be held at some location convenient to the areas affected.

[(b)  The executive administrator shall present the proposed plan of development and hear evidence for and against the plan.

[(c)  After the hearing, the executive administrator shall consider the effect the plan will have on the present and future development, economy, general welfare, and water requirements of the river basin or the areas affected.]

Sec. 16.054.  LOCAL WATER PLANNING. (a)  It is the policy of the state that water resource management, water conservation, and drought planning should occur on an ongoing basis. The board, commission, and Parks and Wildlife Department shall make available where appropriate technical and financial assistance for such planning.

(d)  When preparing individual water plans that address drought or the development, management, or conservation of water resources from the holders of existing permits, certified filings, or certificates of adjudication, the water suppliers, groundwater districts, special districts, irrigation districts, and other water users should ensure that the plan is not in conflict with the applicable approved regional water plan for their region. [HEARING ON COMPLETED STATE WATER PLAN. When the executive administrator has prepared and examined the completed preliminary plan, the board shall hold a public hearing on the plan to determine whether or not it gives adequate consideration to the protection of existing water rights in this state and whether or not it takes into account modes and procedures for the equitable adjustment of water rights affected by the plan. After the hearing, the board may formally adopt the state water plan. A majority vote is necessary for adoption.]

Sec. 16.055.  DROUGHT RESPONSE PLAN. (a)  The division of emergency management of the office of the governor shall be responsible for coordinating the drought response component of the state water plan.

(6)  other factors deemed appropriate by the committee. [EFFECT OF PLAN. (a)  The state water plan, as formally adopted by the board, shall be a flexible guide to state policy for the development of water resources in this state.

[(b)  The commission shall take the plan into consideration in matters coming before it but is not bound by the plan.

[(c)  Nothing in the state water plan or any amendment or modification of the plan affects any vested right existing before August 30, 1965.]

Sec. 16.056.  [AMENDMENT OF PLAN. (a)  The board shall review the plan biennially to consider any amendment or modification that may be needed because of changed conditions.

[(b)  The board shall amend or modify the plan as experience and changed conditions require after holding a public hearing on any amendment or modification in the manner and for the purposes provided by Section 16.054 of this code.

[(c)  Any amendment or modification adopted by the board becomes a part of the plan.

[Sec. 16.057.]  FEDERAL ASSISTANCE IN FINANCING REGIONAL WATER PLANS [PLAN]. The executive administrator may take all necessary action to qualify for federal assistance in financing the development and improvement of the regional water plans [plan].

SECTION 1.03.  Subchapter D, Chapter 11, Water Code, is amended by amending Sections 11.122 and 11.1271 and adding Section 11.1272 to read as follows:

Sec. 11.122.  Amendments to Water Rights Required. (a)  All holders of permits, certified filings, and certificates of adjudication issued under Section 11.323 of this code shall obtain from the commission authority to change the place of use, purpose of use, point of diversion, rate of diversion, acreage to be irrigated, or otherwise alter a water right.

(b)  Subject to meeting all other applicable requirements of this chapter for the approval of an application, an amendment, except an amendment to a water right that increases the amount of water authorized to be diverted or the authorized rate of diversion, shall be authorized if the requested change will not cause adverse impact on other water right holders or the environment on the stream of greater magnitude than under circumstances in which the permit, certified filing, or certificate of adjudication that is sought to be amended was fully exercised according to its terms and conditions as they existed before the requested amendment.

(c)  The commission shall adopt rules to effectuate the provisions of this section.

Sec. 11.1271.  ADDITIONAL REQUIREMENTS:  WATER CONSERVATION PLANS. (a)  The commission shall [may] require from an applicant for a new or amended water right the formulation and submission of a water conservation plan and the adoption of reasonable water conservation measures, as defined by Subdivision (8)(B), Section 11.002, of this code.

SECTION 1.04.  Section 15.401, Water Code, is amended to read as follows:

Sec. 15.401.  PROGRAM CREATION. The research and planning program is created to provide money for research into and planning of the proper conservation, management, and development of the state's water resources, for regional planning by political subdivisions, for facility engineering in economically distressed areas, and for flood control planning by political subdivisions. The program may also provide money for research and planning by Texas political subdivisions related to the proper conservation, management, and development of water resources of areas outside Texas if such research or planning will result in water being available for use in or for the benefit of Texas or will maintain and enhance the quality of water in Texas.

SECTION 1.05.  Subsection (a), Section 15.404, Water Code, is amended to read as follows:

(a)  The board may enter into a contract with any person for research into any matter relating to the conservation and development of the state's water resources or for research by Texas political subdivisions related to the proper conservation and development of water resources of areas outside Texas if such research will result in water being available for use in or for the benefit of Texas or will help maintain and enhance the quality of water in Texas.

SECTION 1.06.  Subsection (f), Section 15.406, Water Code, is amended to read as follows:

(f)  The board shall adopt rules establishing criteria of eligibility for regional facility planning money that considers:

(1)  the relative need of the political subdivision for the money;

(2)  the legal authority of the political subdivision to plan, develop, and operate regional facilities; [and]

(3)  the effect of regional facility planning by the political subdivision on overall regional facility planning, development, and operation in the state and within the area in which the political subdivision is located; and

(4)  the degree to which the regional facility planning by the political subdivision is consistent with an approved regional water plan for the area in which the political subdivision is located.

SECTION 1.07.  Subchapter F, Chapter 15, Water Code, is amended by adding Section 15.4061 to read as follows:

SECTION 1.08.  (a)  Except as provided by Subsection (b) of this section, the state water plan in effect on the effective date of this Act remains in effect until a new state water plan is adopted under Subsection (a), Section 16.051, Water Code, as amended by Section 1.01 of this Act.

(b)  The state water plan shall include ongoing water development projects that have been issued a permit by the Texas Natural Resource Conservation Commission or a predecessor agency for a regional water supply planning study.

ARTICLE 2. WATER MANAGEMENT, MARKETING, AND TRANSFERS

SECTION 2.01.  Section 791.026, Government Code, is amended to read as follows:

Sec. 791.026.  CONTRACTS FOR WATER SUPPLY AND WASTEWATER TREATMENT FACILITIES. (a)  A municipality, district, or river authority of this state may contract with another municipality, district, or river authority of this state to obtain or provide part or all of:

(1)  water supply or wastewater treatment facilities; or

(2)  a lease or operation of water supply facilities or wastewater treatment facilities.

(b)  The contract may provide that the municipality, district, or river authority obtaining one of the services may not obtain those services from a source other than a contracting party, except as provided by the contract.

(c)  If a contract includes a term described by Subsection (b), payments made under the contract are the paying party's operating expenses for its water supply system, wastewater treatment facilities, or both.

(d)  The contract may:

(1)  contain terms and extend for any period on which the parties agree; [and]

(2)  require the purchaser to develop alternative or replacement supplies prior to the expiration date of the contract and may provide for enforcement of such terms by court order; and

(3)  provide that it will continue in effect until bonds specified by the contract and any refunding bonds issued to pay those bonds are paid.

(e)  Where a contract sets forth explicit expiration provisions, no continuation of the service obligation will be implied.

(f)  Tax revenue may not be pledged to the payment of amounts agreed to be paid under the contract.

(g) [(f)]  The powers granted by this section prevail over a limitation contained in another law.

SECTION 2.02.  Section 11.002, Water Code, is amended by amending Subdivision (4) and adding Subdivisions (9) and (10) to read as follows:

(4)  "Beneficial use" means use of the amount of water which is economically necessary for a purpose authorized by this chapter, when reasonable intelligence and reasonable diligence are used in applying the water to that purpose and shall include conserved water.

SECTION 2.03.  Subsection (e), Section 11.023, Water Code, is amended to read as follows:

(e)  The amount of water appropriated for each purpose mentioned in this section shall be specifically appropriated for that purpose, subject to the preferences prescribed in Section 11.024 of this code. The commission may authorize appropriation of a single amount or volume of water for more than one purpose of use. In the event that a single amount or volume of water is appropriated for more than one purpose of use, the total amount of water actually diverted for all of the authorized purposes may not exceed the total amount of water appropriated.

SECTION 2.04.  Subchapter B, Chapter 11, Water Code, is amended by adding Section 11.0275 to read as follows:

SECTION 2.05.  Section 11.036, Water Code, is amended to read as follows:

Sec. 11.036.  CONSERVED OR STORED WATER:  SUPPLY CONTRACT. (a)  A person, association of persons, corporation, or water improvement or irrigation district having in possession and control any storm water, floodwater, or rainwater that is conserved or stored as authorized by this chapter may contract to supply the water to any person, association of persons, corporation, or water improvement or irrigation district having the right to acquire use of the water.

(b)  The price and terms of the contract shall be just and reasonable and without discrimination, and the contract is subject to the same revision and control as provided in this code for other water rates and charges. If the contract sets forth explicit expiration provisions, no continuation of the service obligation will be implied.

(d)  If any person uses the stored or conserved water without first entering into a contract with the party that conserved or stored it, the user shall pay for the use at a rate determined by the commission to be just and reasonable, subject to court review as in other cases.

SECTION 2.06.  Section 11.042, Water Code, is amended to read as follows:

Sec. 11.042.  DELIVERING WATER DOWN BANKS AND BEDS. (a)  Under rules prescribed by the commission, a person, association of persons, corporation, [or] water control and improvement district, water improvement district, or irrigation district supplying stored or conserved water under contract as provided in this chapter may use the bank and bed of any flowing natural stream in the state to convey the water from the place of storage to the place of use or to the diversion point [plant] of the appropriator. [The commission shall prescribe rules for this purpose.]

SECTION 2.07.  Section 11.046, Water Code, is amended to read as follows:

Sec. 11.046.  RETURN SURPLUS [UNUSED] WATER. (a)  A person who takes or diverts water from a watercourse or [running] stream for the purposes authorized by this code shall conduct surplus water back to the watercourse or stream from which it was taken if the water can be returned by gravity flow and it is reasonably practicable to do so.

SECTION 2.08.  Section 11.085, Water Code, is amended to read as follows:

Sec. 11.085.  INTERBASIN [INTERWATERSHED] TRANSFERS. (a)  No person may take or divert any state [of the] water from a river basin [of the ordinary flow, underflow, or storm flow of any stream, watercourse, or watershed] in this state and transfer such water to [into] any other river basin [natural stream, watercourse, or watershed to the prejudice of any person or property situated within the watershed from which the water is proposed to be taken or diverted.

[(b)  No person may transfer water from one watershed to another] without first applying for and receiving a water right or an amendment to a permit, certified filing, or certificate of adjudication [permit] from the commission authorizing the transfer [to do so. Before issuing such a permit, the commission shall hold a hearing to determine the rights that might be affected by the transfer. The commission shall give notice and hold the hearing in the manner prescribed by its procedural rules].

(q) [(c)]  A person who takes or diverts water in violation of this section is guilty of a misdemeanor and upon conviction is punishable by a fine of not [less than $100 nor] more than $1,000 [$500] or by confinement in the county jail for not more than six months.

(r) [(d)]  A person commits a separate offense each day he continues to take or divert water in violation of this section.

SECTION 2.09.  Subsection (a), Section 11.124, Water Code, is amended to read as follows:

(a)  An application to appropriate unappropriated state water must:

(1)  be in writing and sworn to;

(2)  contain the name and post-office address of the applicant;

(3)  identify the source of water supply;

(4)  state the nature and purposes of the proposed use or uses and the amount of water to be used for each purpose;

(5)  state the location and describe the proposed facilities;

(6)  state the time within which the proposed construction is to begin; [and]

(7)  state the time required for the application of water to the proposed use or uses; and

(B)  any land to which that water right permit, certified filing, or certificate of adjudication would be appurtenant.

SECTION 2.10.  Subsection (b), Section 11.135, Water Code, is amended to read as follows:

(b)  The permit shall be in writing and attested by the seal of the commission, and it shall contain substantially the following information:

(1)  the name of the person to whom the permit is issued;

(2)  the date the permit is issued;

(3)  the date the original application was filed;

(4)  the use or purpose for which the appropriation is to be made;

(5)  the amount or volume of water authorized to be appropriated for each purpose; if use of the appropriated water is authorized for multiple purposes, the permit shall contain a special condition limiting the total amount of water that may actually be diverted for all of the purposes to the amount of water appropriated;

(6)  a general description of the source of supply from which the appropriation is proposed to be made;

(7)  the time within which construction or work must begin and the time within which it must be completed; and

(8)  any other information the commission prescribes.

SECTION 2.11.  Subsection (a), Section 11.142, Water Code, is amended to read as follows:

(a)  Without obtaining a permit, a person may construct on his own property a dam or reservoir with normal storage of [to impound or contain] not more than 200 acre-feet of water for domestic and livestock purposes.

SECTION 2.12.  Sections 11.176 and 11.177, Water Code, are amended to read as follows:

Sec. 11.176.  HEARING. (a)  Except as provided by Subsection (b) of this section, the [The] commission shall hold a hearing and shall give the holder of the permit, certified filing, or certificate of adjudication and other interested persons an opportunity to be heard and to present evidence on any matter pertinent to the questions at issue.

Sec. 11.177.  COMMISSION FINDING; ACTION. (a)  At the conclusion of the hearing, the commission shall cancel the permit, certified filing, or certificate of adjudication in whole or in part to the extent that it finds that:

(1)  the water or any portion of the water appropriated under the permit, certified filing, or certificate of adjudication has not been put to an authorized beneficial use during the 10-year period; and

(2)  the holder has not used reasonable diligence in applying the water or the unused portion of the water to an authorized beneficial use or is otherwise unjustified in the nonuse[; and

[(3)  the holder has not been justified in the nonuse or does not then have a bona fide intention of putting the water or the unused portion of the water to an authorized beneficial use within a reasonable time after the hearing].

(b)  In determining what constitutes reasonable diligence or a justified nonuse [and a reasonable time] as used in Subsection (a)(2) [(a)(3)] of this section, the commission shall give consideration to:

(1)  whether sufficient water is available in the source of supply to meet all or part of the appropriation during the 10-year period of nonuse;

(7)  whether the permit, certified filing, or certificate of adjudication has been reserved to provide for instream flows or bay and estuary inflows [the expenditures made or obligations incurred by the holder in connection with the permit, certified filing, or certificate of adjudication;

[(2)  the purpose to which the water is to be applied;

[(3)  the priority of the purpose;

[(4)  the amount of time usually necessary to put water to a beneficial use for the same purpose when diligently developed; and

[(5)  whether at all times during the 10-year period there was rainfall adequate to enable the use of all or part of the water authorized to be appropriated under the permit, certified filing, or certificate of adjudication].

SECTION 2.13.  Section 15.701, Water Code, is amended to read as follows:

Sec. 15.701.  Definitions. In this subchapter:

(1)  "Deposit" means the placement of a water right or the right to use water in the water bank for transfer.

(2)  "Depositor" means a person who deposits or has on deposit a water right in the water bank.

(3)  "Person" includes but is not limited to any individual, corporation, organization, government, or governmental subdivision or agency, including the board, business trust, estate, trust, partnership, association, and any other legal entity.

(4)  "Transfer" means the conveyance of a water right or the right to use water under a water right in any of the following manners:

(A)  the conveyance of legal title to a water right; or

(B)  a contract or option contract to allow use of a water right.

(5)  "Trust" means the Texas Water Trust.

(6)  "Water bank" or "bank" means the Texas Water Bank.

(7) [(6)]  "Water right" means a right acquired or authorized under the laws of this state to impound, divert, or use state water, underground water, or water from any source to the extent authorized by law.

SECTION 2.14.  Section 15.702, Water Code, is amended to read as follows:

Sec. 15.702.  Creation of Bank. The Texas Water Development Board shall establish the Texas Water Bank. The board shall administer the water bank to facilitate water transactions [the transfer of water from all sources as necessary] to provide sources of adequate water supplies for use within the State of Texas.

SECTION 2.15.  Subsection (a), Section 15.703, Water Code, is amended to read as follows:

(a)  The board may take all actions necessary to operate the water bank and to facilitate the transfer of water rights from the water bank for future beneficial use including but not limited to:

(1)  negotiating a sale price and terms acceptable to the depositor and purchaser;

(2)  maintaining a registry of water bank deposits and those water users in need of additional supplies;

(3)  informing water users in need of additional supply of water rights available in the bank;

(4)  encouraging water right holders to implement water conservation practices and deposit the right to use the conserved water into the bank;

(5)  establishing requirements for deposit of a water right into the water bank including minimum terms for deposit;

(6)  purchasing, holding, and selling water rights in its own name;

(7)  establishing regional water banks; [and]

(8)  acting as a clearinghouse for water marketing information including water availability, pricing of water transactions, environmental considerations, and potential buyers and sellers of water rights;

(11)  other actions to facilitate water transactions [transfers].

SECTION 2.16.  Subchapter K, Chapter 15, Water Code, is amended by adding Section 15.7031 to read as follows:

SECTION 2.17.  Section 15.704, Water Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a)  A [Up to 50 percent of a] water right may be deposited in the water bank for an initial term of up to 10 years, unless otherwise held in the Texas Water Trust as established under Section 15.7031 of this code, during which time the water right is exempt from cancellation by the commission under the terms of Subchapter E of Chapter 11 of this code. A water right is exempt from cancellation under this subsection only once even if it has been transferred or redeposited.

SECTION 2.18.  (a)  All permits approved by the Texas Natural Resource Conservation Commission before the effective date of this Act that allow the multiple use of the appropriation of a specific amount of water and which are no longer subject to appeal are validated in all respects as if they originally had been legally authorized or accomplished.

(b)  This article does not apply to an application for an interbasin transfer or reuse project using privately owned groundwater received and pending before March 2, 1997. Any subsequent renewals of such applications shall be subject to the provisions of this Act.

(c)  Nothing in this Act shall affect the validity of any interbasin transfer permitted or authorized before the effective date of this Act.

ARTICLE 3.  EMERGENCY AUTHORIZATIONS; ENFORCEMENT

SECTION 3.01.  Subsection (a), Section 11.082, Water Code, is amended to read as follows:

(a)  A person who wilfully takes, diverts, or appropriates state water without complying with the applicable requirements of this chapter is also liable to a civil penalty of not more than $5,000 [$1,000] for each day he continues the taking, diversion, or appropriation.

SECTION 3.02.  Subchapter C, Chapter 11, Water Code, is amended by adding Sections 11.0841, 11.0842, and 11.0843 to read as follows:

SECTION 3.03.  Section 11.139, Water Code, is amended to read as follows:

Sec. 11.139.  EMERGENCY AUTHORIZATIONS [PERMITS]. (a)  Except as provided by Section 11.148 of this code, the [The] commission may grant an emergency permit, order, or amendment to an existing permit, certified filing, or certificate of adjudication after notice to the governor [for the diversion and use of water] for an initial [a] period of not more than 120 [30] days if the commission [it] finds that emergency conditions exist which present an imminent threat to [threaten] the public health and[,] safety[, and welfare] and which override the necessity to comply with established statutory procedures and there are no feasible practicable alternatives to the emergency authorization. Such emergency action may be renewed once for not longer than 60 days.

(b)  A person desiring to obtain an emergency authorization under this section shall submit to the commission a sworn application containing the following information:

(k)  [An emergency permit may be granted for a period of not more than 30 days, and no extension or additional emergency permit may be granted at the expiration of the original permit.

[(c)  An emergency permit may be granted under this section without the necessity to comply with statutory and other procedures required for granting other permits issued by the commission.

[(d)]  The commission may prescribe rules and adopt fees which are necessary to carry out the provisions of this section.

(l) [(e)]  An emergency authorization [permit] does not vest in the grantee [permittee] any right to the diversion, impoundment, or [and] use of water and shall expire and be cancelled in accordance with its terms.

SECTION 3.04.  Subsection (c), Section 12.052, Water Code, is amended to read as follows:

(c)  If the owner of a dam that is required to be constructed, reconstructed, repaired, or removed in order to comply with the rules and orders promulgated under Subsection (a) of this section wilfully fails or refuses to comply within the 30-day period following the date of the commission's final, nonappealable order to do so or if a person wilfully fails to comply with any rule or other order issued by the commission under this section within the 30-day period following the effective date of the order, he is liable to a penalty of not more than $5,000 [$1,000] a day for each day he continues to violate this section. The state may recover the penalty by suit brought for that purpose in the district court of Travis County.

SECTION 3.05.  Section 16.236, Water Code, is amended to read as follows:

Sec. 16.236.  CONSTRUCTION OF LEVEE WITHOUT APPROVAL OF PLANS; LEVEE SAFETY. (a)  No person may construct, attempt to construct, cause to be constructed, maintain, or cause to be maintained any levee or other such improvement on, along, or near any stream of this state that is subject to floods, freshets, or overflows so as to control, regulate, or otherwise change the floodwater of the stream without first obtaining approval of the plans by the commission.

(b)  The commission shall make and enforce rules and orders and shall perform all other acts necessary to provide for the safe construction, maintenance, repair, and removal of levees located in this state.

(g)  Any person who violates any provision of Subsection (a) of this section is guilty of a Class C misdemeanor and upon conviction is punishable by a fine of not more than $1,000 [$100]. A separate offense is committed each day a structure constructed in violation of this section is maintained.

(h)  Subsection (a) of this [(c)  At the request of the executive director, the attorney general shall file suit in a district court of Travis County to enjoin any violation or threatened violation of this section. In the suit, the attorney general may seek to have the illegal levee or other improvement removed and the preexisting conditions restored and may also collect civil penalties of up to $100 a day for each day a violation occurs.

[(d)  This] section does not apply to:

(1)  any dam, reservoir, or canal system associated with a water right issued or recognized by the commission [dams permitted by the commission or recognized as valid by final decree in any proceeding begun under Subchapter G, Chapter 11, of this code];

(2)  dams authorized by Section 11.142 of this code;

(3)  a levee or other improvement within the corporate limits of a city or town provided: (a) plans for the construction or maintenance or both must be approved by the city or town as a condition precedent to starting the project and (b) the city or town requires that such plans be in substantial compliance with rules and standards adopted by the commission; [or]

(4)  a levee or other improvement within the boundaries of any political subdivision which has qualified for the National Flood Insurance Program as authorized by the National Flood Insurance Act of 1968 (Title 42, U.S.C., Sections 4001-4127) provided: (a) plans for the construction or maintenance or both must be approved by the political subdivision which is participating in the national flood insurance program as a condition precedent to starting the project and (b) the political subdivision requires that such plans be in substantial compliance with rules and standards adopted by the commission;

(5)  projects implementing soil and water conservation practices set forth in a conservation plan with a landowner or operator and approved by the governing board of a soil and water conservation district organized under the State Soil Conservation Law, as amended (Article 165a-4, Vernon's Texas Civil Statutes), provided that the governing board finds the practices do not significantly affect stream flooding conditions on, along, or near a state stream; or

(6)  any levee or other improvement constructed outside of the 100-year floodway. For the purposes of this section, "100-year floodway" is defined as the channel of a stream and the adjacent land areas that must be reserved in order to discharge the 100-year flood without cumulatively increasing the water surface elevation more than one foot above the 100-year flood elevation prior to encroachment.

(i) [(e)]  On projects located within the corporate limits of a city or town or within the boundaries of any political subdivision which are exempt from the provisions of Subsection (a) of this section by Subdivision (3) or (4) of Subsection (h) of this section [(d) above], any person whose property is located outside of the corporate limits of such city or town or of the boundaries of such a political subdivision and whose property is affected or potentially affected by the effect of the project on the floodwaters of the stream may appeal the decision of such political subdivision. The appeal shall be in writing and shall specify the grounds therefor and a copy shall be sent by certified mail to the project applicant and to the city or town or such political subdivision. The timely filing of such an appeal with the executive director suspends the decision of the city or town or political subdivision until a final decision is rendered by the commission. The executive director shall review the complaint and investigate the facts surrounding the nature of the complaint. If the executive director finds that the complaint is frivolous or nonmeritorious or made solely for purposes of harassment or delay, then he shall dismiss the appeal. Otherwise, the executive director shall refer the appeal to the commission which shall after due notice hold a hearing to determine whether the project should be approved using the standards established by the commission and shall hear such appeal de novo under the procedural rules established by the commission for other reclamation projects.

SECTION 3.06.  Subchapter G, Chapter 16, Water Code, is amended by adding Section 16.237 to read as follows:

ARTICLE 4. SURFACE WATER AND GROUNDWATER SUPPLIES

SECTION 4.01.  Section 11.134, Water Code, is amended by amending Subsection (b) and adding Subsection (c) to read as follows:

(b)  The commission shall grant the application only if:

(1)  the application conforms to the requirements prescribed by this chapter and is accompanied by the prescribed fee;

(2)  unappropriated water is available in the source of supply;

(3)  the proposed appropriation:

(A)  is intended for a [contemplates the application of water to any] beneficial use;

(B)  does not impair existing water rights or vested riparian rights; [and]

(C)  is not detrimental to the public welfare; [and]

(4)  the applicant has provided evidence that reasonable diligence will be used to avoid waste and achieve water conservation as defined by Subdivision (8)(B), Section 11.002, of this code.

SECTION 4.02.  Subchapter D, Chapter 11, Water Code, is amended by adding Sections 11.1501 and 11.151 to read as follows:

SECTION 4.03.  Section 11.153, Water Code, is amended by amending the section heading and Subsections (a) and (d) to read as follows:

Sec. 11.153.  [PILOT] PROJECTS FOR STORAGE OF APPROPRIATED WATER IN AQUIFERS. (a)  The commission shall investigate the feasibility of storing appropriated water in various types of aquifers around the state by encouraging the issuance of temporary or term permits for [pilot] demonstration projects for the storage of appropriated water for subsequent retrieval and beneficial use [in the following aquifers in the specified counties:

[(1)  the Anacacho, Austin Chalk, and Glen Rose Limestone aquifers in Bexar County and Medina County;

[(2)  the Carrizo-Wilcox aquifer in Bexar, Webb, Smith, Wood, Rains, and Van Zandt counties;

[(3)  the Hickory and Ellenberger aquifers in Gillespie County; and

[(4)  the Gulf Coast aquifer in Cameron and Hidalgo counties].

(d)  The commission shall only issue a [A] final order granting a permit or amendment to a permit authorizing the storage of appropriated water in aquifers for subsequent beneficial use where completed pilot projects or historically demonstrated projects have been shown to be feasible under the criteria provided in Sections 11.154(c) and (d)[, other than for the pilot projects authorized by this section, may not be issued before June 1, 1999].

SECTION 4.04.  Subsections (a), (b), (c), and (e), Section 11.154, Water Code, are amended to read as follows:

(a)  An application filed with the commission to undertake a [pilot] project under Section 11.153 must include:

(1)  the information required for an application for a permit or permit amendment to appropriate state water;

(2)  all information required for an application for a permit for a Class V injection well without requiring a separate hearing or notice; and

(3)  a map or plat showing the injection facility and the aquifer in which the water will be stored.

(b)  If the application is for a permit or permit amendment to store appropriated water in a groundwater [an underground water] reservoir or a subdivision of a groundwater [an underground water] reservoir, as defined by Chapter 36 [52], that is under the jurisdiction of a groundwater [an underground water] conservation district:

(1)  the applicant shall:

(A)  provide a copy of the application to each groundwater [underground water] conservation district that has jurisdiction over the reservoir or subdivision;

(B)  cooperate with each district [the districts] that has [have] jurisdiction over the reservoir or subdivision to ensure compliance with the rules of each district;

(C)  cooperate with each district that has jurisdiction over the reservoir or subdivision to develop rules regarding the injection, storage, and withdrawal of appropriated water stored in the aquifer; and

(D)  comply with the rules governing the injection, storage, and [or] withdrawal of appropriated water stored in the reservoir or subdivision that are adopted by each [a] district that has jurisdiction over the reservoir or subdivision; and

(2)  the commission shall require that any agreement the applicant reaches with a district that has jurisdiction over the reservoir or subdivision regarding the terms for the injection, storage, and withdrawal of appropriated water be included as a condition of the permit or permit amendment.

(c)  On [completion of a pilot project and] receipt of an [appropriate] application for a permit or an amendment to an existing permit from an applicant with a completed pilot or historically demonstrated project, the commission shall evaluate the success of the [pilot] project for purposes of issuing a final order granting a permit or permit amendment authorizing the storage of appropriated water incident to a beneficial use. The commission shall consider whether:

(1)  the introduction of water into the aquifer will alter the physical, chemical, or biological quality of native groundwater to a degree that the introduction would:

(A)  render groundwater produced from the aquifer harmful or detrimental to people, animals, vegetation, or property; or

(B)  require treatment of the groundwater to a greater extent than the native groundwater requires before being applied to that beneficial use;

(2)  the water stored in the receiving aquifer can be successfully harvested from the aquifer for beneficial use; and

(3)  [the permit holder has provided evidence that] reasonable diligence will be used to protect the water stored in the receiving aquifer from unauthorized withdrawals to the extent necessary to maximize the permit holder's ability to retrieve and beneficially use the stored water without experiencing unreasonable loss of appropriated water.

(e)  A permit to store appropriated water in a groundwater [an underground water] reservoir or subdivision, as defined by Chapter 36 [52], shall provide as a condition to the permit that the permit holder shall:

(1)  register the permit holder's injection and recovery wells with a groundwater [an underground water] conservation district that has jurisdiction over the reservoir or subdivision, if any; and

(2)  each calendar month, provide the district, if any, with a written report showing for the previous calendar month:

(A)  the amount of water injected for storage; and

(B)  the amount of water recaptured for use.

SECTION 4.05.  Subsection (b), Section 11.155, Water Code, is amended to read as follows:

(b)  The board shall make other studies, investigations, and surveys of the aquifers in the state as it considers necessary to determine the occurrence, quantity, quality, and availability of other aquifers in which water may be stored and subsequently retrieved for beneficial use. The board shall undertake the studies, investigations, and surveys in the following order of priority:

(1)  the aquifers described [identified] in Section 11.153(a);

(2)  areas designated by the commission as "priority groundwater management [critical] areas" under Section 35.008 [52.053]; and

(3)  other areas of the state in a priority to be determined by the board's ranking of where the greatest need exists.

SECTION 4.06.  Subsection (b), Section 11.173, Water Code, is amended to read as follows:

(b)  A permit, certified filing, or certificate of adjudication or a portion of a permit, certified filing, or certificate of adjudication is exempt from cancellation under Subsection (a) of this section:

(1)  to the extent of the owner's participation in the Conservation Reserve Program authorized by the Food Security Act, Pub.L. No. 99-198, Secs. 1231-1236, 99 Stat. 1354, 1509-1514 (1985) or a similar governmental program; or

(2)  if any portion of the water authorized to be used pursuant to a permit, certified filing, or certificate of adjudication has been used in accordance with a regional water [management] plan approved pursuant to Section 16.053 of this code [by the commission].

SECTION 4.07.  Subdivision (6), Section 15.001, Water Code, is amended to read as follows:

(6)  "Project" means:

(A)  any undertaking or work, including planning activities and work to obtain regulatory authority at the local, state, and federal level, to conserve, convey, and develop [surface or subsurface] water resources in the state, to provide for the maintenance and enhancement of the quality of the water of the state, to provide nonstructural and structural flood control, drainage, subsidence control, recharge, chloride control, brush control, precipitation enhancement, and desalinization, to provide for the acquisition of water rights and the repair of unsafe dams, and to carry out other purposes defined by board rules; [or]

(B)  any undertaking or work outside the state to provide for the maintenance and enhancement of the quality of water by eliminating saline inflow through well pumping and deep well injection of brine; or

(C)  any undertaking or work by Texas political subdivisions or institutions of higher education to conserve, convey, and develop water resources in areas outside Texas or to provide for the maintenance and enhancement of the quality of the water in areas adjoining Texas, if such undertaking or work will result in water being available for use in or for the benefit of Texas or will maintain and enhance the quality of water in Texas.

SECTION 4.08.  Subsection (b), Section 15.002, Water Code, is amended to read as follows:

(b)  The legislature finds that the conventional means of financing projects are inadequate to meet current and anticipated needs of the state. Therefore, it is the further intent of the legislature to provide a means of coordinating the development of projects [throughout the state] through the board and to provide political subdivisions the maximum opportunity to finance projects through programs provided by this chapter. Projects may be in the state or outside the state, provided that out-of-state projects must be funded through a Texas political subdivision or an institution of higher education and must result in water being available for use in or for the benefit of Texas or maintain and enhance the quality of water in Texas.

SECTION 4.09.  Section 17.895, Water Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a)  The board or lender districts may make conservation loans for capital equipment or materials, labor, preparation costs, and installation costs:

(1)  to improve water use efficiency of water delivery and application on existing irrigation systems;

(2)  for preparing irrigated land to be converted to dryland conditions; [or]

(3)  for preparing dryland for more efficient use of natural precipitation;

(5)  for implementing precipitation enhancement activities in areas of the state where such activities would be, in the board's judgment, most effective.

SECTION 4.10.  Subdivision (12), Section 35.002, Water Code, is amended to read as follows:

(12)  "Priority groundwater management [Critical] area" means an area designated and delineated by the commission as an area that is experiencing or is expected to experience critical groundwater problems.

SECTION 4.11.  Section 35.007, Water Code, is amended to read as follows:

Sec. 35.007.  IDENTIFYING, DESIGNATING, AND DELINEATING PRIORITY GROUNDWATER MANAGEMENT [CRITICAL] AREAS. (a)  The executive director and the executive administrator shall meet at least once a year to identify, based on information gathered by the commission and the Texas Water Development Board, those areas of the state that are experiencing or that are expected to experience, [based on information available to the commission and the Texas Water Development Board,] within the immediately following 25-year [20-year] period, critical groundwater problems, including shortages of surface water or groundwater, land subsidence resulting from groundwater withdrawal, and contamination of groundwater supplies.

(b)  If the executive director concludes that an area of the state should be considered for designation as a priority groundwater management [critical] area, the executive director shall prepare a report to the commission.

(c)  Before the executive director requests a study from the executive administrator under Subsection (d), the executive director shall provide notice to the persons listed in Section 35.009(c) of areas being considered for identification as experiencing or expected to experience critical groundwater problems and shall consider any information or studies submitted under this subsection. Not later than the 45th day after the date of the notice, a person required to receive notice under this subsection may submit to the executive director information or studies that address the potential effects on an area of being identified as experiencing or expected to experience critical groundwater problems.

(d)  The executive director shall begin preparation of a priority groundwater management [critical] area report by requesting a study from the executive administrator. The study must:

(1)  include an appraisal of the hydrogeology of the area and matters within the Texas Water Development Board's planning expertise relevant to the area;

(3)  [. The study must] be completed and delivered to the executive director on or before the 180th [90th] day following the date of the request. If the study is not delivered within this 180-day [90-day] period, the executive director may proceed with the preparation of the report.

(f) [(d)]  The report shall include:

(1)  the recommended delineation of the boundaries of any proposed priority groundwater management [critical] area in the form of an order [a rule] to be considered for adoption by the commission;

(2)  the reasons and supporting information for or against designating the area as a priority groundwater management [critical] area;

(3)  a recommendation regarding whether a district should be created in the priority groundwater management [critical] area or whether the priority groundwater management [critical] area should be added to an existing district;

(4)  a recommendation as to actions that should be considered to conserve natural resources;

(6)  any other information that the executive director considers helpful to the commission.

(g) [(e)]  The executive director must complete the report and file it with the commission on or before the 240th [210th] day following the date on which the executive administrator was requested to produce a study. The executive director shall make the report available for public inspection by providing a copy of the report to at least one public library and the county clerk's office in each county in which the proposed priority groundwater management [critical] area is located and to all districts adjacent to the area of the proposed priority groundwater management area.

(h) [(f)]  To carry out this section, the executive director may make necessary studies, hold hearings, solicit and collect information, and use information already prepared by the executive director or the executive administrator for other purposes.

SECTION 4.12.  Section 35.008, Water Code, is amended to read as follows:

Sec. 35.008.  PROCEDURES FOR DESIGNATION OF PRIORITY GROUNDWATER MANAGEMENT AREA; CONSIDERATION OF CREATION OF DISTRICT OR ADDITION OF LAND IN PRIORITY GROUNDWATER MANAGEMENT AREA TO EXISTING DISTRICT [CRITICAL AREAS]. (a)  The commission shall designate priority groundwater management [critical] areas using the procedures provided by this chapter in lieu of those provided by [applicable to rulemaking under the Administrative Procedure Act,] Subchapter B, Chapter 2001, Government Code[, but if procedures required by this chapter are in conflict with that Act, this chapter controls].

(b)  The commission shall call an evidentiary hearing to consider:

(e)  The designation of a priority groundwater management [critical] area may not be appealed nor may it be challenged under the Administrative Procedure Act, Section 2001.038, Government Code.

SECTION 4.13.  Section 35.009, Water Code, is amended to read as follows:

Sec. 35.009.  NOTICE AND HEARING. (a)  The [In addition to the notice required for rulemaking under the Administrative Procedure Act, Section 2001.023, Government Code, the] commission shall have notice of the hearing published in at least one newspaper with general circulation in the county or counties in which the area proposed for designation as a priority groundwater management [critical] area or the area within a priority groundwater management area being considered for district creation or for addition to an existing district is [to be] located. Notice must be published not later than the 30th day before the date set for the commission to consider the designation of the priority groundwater management [critical] area, the creation of a district in a priority groundwater management area, or the addition of land in a priority groundwater management area to an existing district.

(b)  The notice must include:

(1)  if applicable, a statement of the general purpose and effect of designating the proposed priority groundwater management area [critical areas];

(2)  if applicable, a statement of the general purpose and effect of creating a district in the priority groundwater management area;

(4)  a map generally outlining the boundaries of the area being considered for priority groundwater management [proposed critical] area designation or the priority groundwater management area being considered for district creation or for addition to an existing district, or notice of the location at which a copy of the map may be examined or obtained;

(6) [(3)]  a description or the name of the locations in the affected area at which the commission has provided copies of the executive director's report to be made available for public inspection;

(7)  the name and address of each public library, each county clerk's office, and each district to which the commission has provided copies of the executive director's report; and

(8) [(4)]  the date, time, and place of the hearing [at which the commission will consider the designation of the critical areas].

SECTION 4.14.  Subsections (b), (c), (d), and (e), Section 35.012, Water Code, are amended to read as follows:

(b)  If the commission finds that the land and other property in the priority groundwater management [critical] area would benefit from the creation of one or more districts, that there is a public need for one or more districts, and that the creation of one or more districts would further the public welfare, the commission shall issue an order stating that the creation of one or more districts is needed.

(c)  Following [During the period between] the [date of] issuance of a commission order under Subsection (b) [and one year after the close of the next regular session of the legislature following the issuance of the order], the landowners in the priority groundwater management [critical] area may:

(1)  create one or more districts under Subchapter B, Chapter 36;

(2)  have the area annexed to a district that adjoins the area; or

(3)  create one or more districts through the legislative process.

(d)  The commission shall identify the areas subject to the order of the commission issued under Subsection (b) that have not[, in the period provided by Subsection (c),] been incorporated into a district[,] and shall delineate proposed boundaries of a district to include those areas. If the commission proposes the creation of one or more districts, the Texas Agricultural Extension Service [commission] shall begin an educational program within such areas with the assistance and cooperation of the Texas Water Development Board, the commission, other state agencies, and existing districts to inform the residents of the status of the area's water resources and management options including possible formation of a district, before beginning the procedures for creation of a district provided in Subchapter B, Chapter 36.

(e)  If the commission fails to find that the district would be a benefit to the land and other property within the priority groundwater management [critical] area, that there is a public need for the district, or that creation of the district will further the public welfare, the commission shall issue an order stating that a district should not be created within the boundaries of the priority groundwater management [critical] area.

SECTION 4.15.  Section 35.013, Water Code, is amended to read as follows:

Sec. 35.013.  ADDING PRIORITY GROUNDWATER MANAGEMENT [CRITICAL] AREA TO EXISTING DISTRICT. (a)  If land in a priority groundwater management [critical] area is located adjacent to one or more existing districts, the commission, instead of issuing an order under Section 35.012, may issue an order recommending that the priority groundwater management [critical] area be added to the existing district designated by the commission. In its order, the commission must find that the land and other property in the priority groundwater management [critical] area and the land in the existing district will benefit from the addition of the area, that there is a public need to add the priority groundwater management [critical] area to the existing district, and that the addition of the land to the existing district would further the public welfare.

(b)  If the executive director recommends that the priority groundwater management [critical] area be added to an existing district or if the commission considers it possible to add the priority groundwater management [critical] area to an adjacent existing district, the commission shall give notice to the board of the existing district recommended by the executive director or considered by the commission to possibly serve the area and to any other existing districts adjacent to the priority groundwater management [critical] area.

(c)  The commission shall submit a copy of the order to the board of the district to which it is recommending the priority groundwater management [critical] area be added. The board shall vote on the addition of the priority groundwater management [critical] area to the district and shall advise the commission of the outcome.

(d)  If the board votes to accept the addition of the priority groundwater management [critical] area to the district, the board:

(2)  shall call an election within the priority groundwater management [critical] area as delineated by the commission to determine if the priority groundwater management [critical] area will be added to the district; and

(3)  [. In the order calling the election, the board] shall designate election precincts and polling places for the elections in the order calling an election under this subsection.

(e)  The board shall give notice of the election and the proposition to be voted on. The board shall publish notice of the election at least one time in one or more newspapers with general circulation within the boundaries of the priority groundwater management [critical] area. The notice must be published before the 30th day preceding the date set for the election.

(f)  The ballots for the election shall be printed to provide for voting for or against the proposition: "The inclusion of __________ (briefly describe priority groundwater management [critical] area) in the __________ District." If the district has outstanding debts or taxes [issued bonds], the proposition shall include the following language: "and assumption by the described area of a proportional share of the debts or taxes [outstanding indebtedness] of the district."

(g)  Immediately after the election, the presiding judge of each polling place shall deliver the returns of the election to the board, and the board shall canvass the returns for the election within the priority groundwater management [critical] area and declare the results. If a majority of the voters in the priority groundwater management [critical] area voting on the proposition vote in favor of the proposition, the board shall declare that the priority groundwater management [critical] area is added to the district. If a majority of the voters in the priority groundwater management [critical] area voting on the proposition vote against adding the priority groundwater management [critical] area to the district, the board shall declare that the priority groundwater management [critical] area is not added to the district. The board shall file a copy of the election results with the commission.

(h)  If the voters approve adding the priority groundwater management [critical] area to the district, the board of the district to which the priority groundwater management [critical] area is added shall provide reasonable representation on that board compatible with the district's existing scheme of representation.

(i)  If the proposition is defeated, another election to add the priority groundwater management [critical] area to an existing district may not be called before the first anniversary of the date on which the election on the proposition was held.

SECTION 4.16.  Subsections (b) and (c), Section 35.014, Water Code, are amended to read as follows:

(b)  The costs of an election to add a priority groundwater management [critical] area to an existing district at which the voters approve adding the priority groundwater management [critical] area to the district shall be paid by the existing district.

(c)  The costs of an election to create a district or add a priority groundwater management [critical] area to an existing district at which the proposition fails shall be paid by the commission.

SECTION 4.17.  Section 35.015, Water Code, is amended to read as follows:

Sec. 35.015.  STATE ASSISTANCE. [(a)  A political subdivision located in or that has within its boundaries an area or part of an area delineated as a critical area, and in which the qualified voters fail to approve the creation of a district or to join an existing district, shall not be eligible to receive any financial assistance from the state under Chapter 15, 16, or 17 for use within that portion of the critical area not covered by a district.

[(b)]  A political subdivision located in an area delineated as a priority groundwater management [critical] area, and in which qualified voters approve the creation of a district or annexation into an existing district, shall be given consideration to receive financial assistance from the state under Chapter 17 for funds to be used in addressing issues identified in the priority groundwater management [critical] area report in the manner provided by Sections 17.124 and 17.125[, except that the board is not required to make the finding set out in Section 17.125(a)(2)].

SECTION 4.18.  Section 35.017, Water Code, is amended to read as follows:

Sec. 35.017.  STATE-OWNED LAND. If state-owned land or a portion of state-owned land is located in a priority groundwater management [critical] area, the state agency that has management and control over that land under the constitution or by statute may elect by written agreement with the commission and the district to include the state-owned land in the district. The agreement shall be entered into as provided by the Texas Intergovernmental Cooperation Act, Chapter 741, Government Code, and may include provisions for the payment by the state agency of reasonable fees to the district. If the state does not elect to enter into the agreement to include the state-owned land in the district, the state agency must establish a groundwater management plan that will conserve, protect, and prevent the waste of groundwater on that state-owned land.

SECTION 4.19.  Chapter 35, Water Code, is amended by adding Sections 35.018 and 35.019 to read as follows:

SECTION 4.20.  Section 36.001, Water Code, is amended by amending Subdivision (14) and adding Subdivisions (16) and (17) to read as follows:

(14)  "Priority groundwater management [Critical] area" means an area designated and delineated by the commission under Chapter 35 as an area experiencing or expected to experience critical groundwater problems.

SECTION 4.21.  Subchapter A, Chapter 36, Water Code, is amended by adding Section 36.0015 to read as follows:

SECTION 4.22.  Subsection (c), Section 36.012, Water Code, is amended to read as follows:

(c)  The boundaries of a district must be coterminous with or inside the boundaries of a management area or a priority groundwater management [critical] area.

SECTION 4.23.  Subsection (d), Section 36.013, Water Code, is amended to read as follows:

(d)  If a part of the proposed district is not included within either a management area or a priority groundwater management [critical] area, the petition to create a district may also contain a request to create a management area. A request to create a management area must comply with the requirements for a petition in Section 35.005, and may be acted on by the commission separately from the petition to create the district.

SECTION 4.24.  Subchapter B, Chapter 36, Water Code, is amended by adding Section 36.0151 to read as follows:

SECTION 4.25.  Section 36.016, Water Code, is amended to read as follows:

Sec. 36.016.  APPOINTMENT OF TEMPORARY DIRECTORS. (a)  If the commission grants a petition to create a district under Section 36.015 or after the commission dissolves a district's board under Section 36.303, it shall appoint five temporary directors.

(c)  Temporary directors appointed under this section [who] shall serve until the initial directors are elected and have qualified for office or until the voters fail to approve the creation of the district.

(d) [(b)]  If an appointee of the commission or of a county commissioners court fails to qualify or if a vacancy occurs in the office of temporary director, the commission or the county commissioners court, as appropriate, shall appoint an individual to fill the vacancy.

(e) [(c)]  As soon as all temporary directors have qualified, the directors shall meet, take the oath of office, and elect a chairman and vice chairman from among their membership. The chairman shall preside at all meetings of the board and, in the chairman's absence, the vice chairman shall preside.

SECTION 4.26.  Subchapter B, Chapter 36, Water Code, is amended by adding Section 36.0161 to read as follows:

SECTION 4.27.  Section 36.052, Water Code, is amended to read as follows:

Sec. 36.052.  OTHER LAWS NOT APPLICABLE. (a)  Other laws governing the administration or operations of districts created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution, shall not apply to any district governed by this chapter. This chapter prevails over any other law in conflict or inconsistent with this chapter, except any special law governing a specific district shall prevail over this chapter.

SECTION 4.28.  Subchapter D, Chapter 36, Water Code, is amended by amending Section 36.107 and adding Sections 36.1071, 36.1072, and 36.1073 to read as follows:

Sec. 36.107.  RESEARCH [AND PLANNING]. [(a)]  A district may carry out any research projects deemed necessary by the board.

Sec. 36.1071.  MANAGEMENT PLAN. (a) [(b)]  Following notice and hearing, the district shall, in coordination with surface water management entities on a regional basis, develop a comprehensive management plan which addresses the following management goals, as applicable:

(4)  address water supply needs in a manner that is not in conflict with the appropriate approved regional water plan if a regional water plan has been approved under Section 16.053 [for the most efficient use of the groundwater, for controlling and preventing waste of groundwater, and for controlling and preventing subsidence. The plan may be reviewed annually but must be reviewed by the board at least once every five years].

(f) [(c)  The district shall specify in the management plan, in as much detail as possible, the acts, procedures, performance, and avoidance that are or may be necessary to effect the plan, including specifications and proposed rules.] The district shall adopt rules necessary to implement the management plan.

Sec. 36.1072.  TEXAS WATER DEVELOPMENT BOARD REVIEW AND CERTIFICATION OF MANAGEMENT PLAN. (a)  A [The] district shall, not later than two years after the creation of the district or, if the district required confirmation, after the election confirming the district's creation, submit [file a copy of] the management plan required under Section 36.1071 to [and the rules with] the executive administrator for review and certification [commission].

SECTION 4.29.  Subsection (a), Section 36.108, Water Code, is amended to read as follows:

(a)  If two or more districts are located within the boundaries of the same management area, each district shall prepare a comprehensive management plan as required by Section 36.1071 [36.107] covering that district's respective territory. On completion of the plan, each district shall forward a copy of the new revised management plan to the other districts in the management area.

SECTION 4.30.  Section 36.113, Water Code, is amended to read as follows:

Sec. 36.113.  PERMITS FOR WELLS. (a)  A district shall require permits for the drilling, equipping, or completing of wells[,] or for substantially altering the size of wells or well pumps.

(e)  Permits may be issued subject to the rules promulgated by the district and subject to terms and provisions with reference to the drilling, equipping, completion, or alteration of wells or pumps that may be necessary to [conserve the groundwater,] prevent waste and achieve water conservation, minimize as far as practicable the drawdown of the water table or the reduction of artesian pressure, lessen interference between wells, or control and prevent subsidence.

SECTION 4.31.  Subchapter D, Chapter 36, Water Code, is amended by adding Section 36.1131 to read as follows:

SECTION 4.32.  Section 36.117, Water Code, is amended to read as follows:

Sec. 36.117.  EXEMPTIONS; Exception; Limitations. (a)  A district may exempt wells from the requirements to obtain a drilling permit, an operating permit, or any other permit required by this chapter or the district's rules. A district may not require a permit for:

(1)  drilling or producing from a well either drilled, completed, or equipped so that it is incapable of producing more than 25,000 gallons of groundwater a day;

(2)  the drilling or alteration of the size of a well or to restrict the production of a well if the water produced or to be produced from the well is used or to be used to supply the domestic needs of 10 or fewer households and a person who is a member of each household is either the owner of the well, a person related to the owner or a member of the owner's household within the second degree by consanguinity, or an employee of the owner;

(3)  the drilling or alteration of the size of a well or to restrict the production from the well if the water produced or to be produced from the well is used or to be used to provide water for feeding livestock and poultry connected with farming, ranching, or dairy enterprises;

(4)  water wells to supply water for hydrocarbon production activities, regardless of whether those wells are producing, that are associated with any well permitted by the Railroad Commission of Texas drilled before September 1, 1985; or

(5)  jet wells used for domestic needs.

(b)  The board shall adopt rules determining the applicability of Subsection (a)(3) to facilities used primarily for feeding livestock.

(c)  The district shall not deny the owner of a tract of land, or his lessee, who has no well equipped to produce more than 25,000 gallons a day on the tract, either a permit to drill a well on his land or the privilege to produce groundwater from his land, subject to the rules of the district.

(d)  A district may not restrict the production of any well equipped to produce 25,000 gallons or less a day.

(e)  Nothing in this chapter applies to wells drilled for oil, gas, sulphur, uranium, or brine, or for core tests, or for injection of gas, saltwater, or other fluid, or for any other purpose, under permits issued by the Railroad Commission of Texas. A district may not require a drilling permit for [to drill] a well to supply water for drilling any [of these] wells permitted by the Railroad Commission of Texas. Any well that ceases to be used for these purposes and is then used as an ordinary water well is subject to the rules of the district. Water wells drilled after September 1, 1997, to supply water for hydrocarbon production activities must meet the spacing requirements of the district unless no space is available within 300 feet of the production well or the central injection station.

(f)  Water wells exempted under this section shall be equipped and maintained so as to conform to the district's rules requiring installation of casing, pipe, and fittings to prevent the escape of groundwater from a groundwater reservoir to any reservoir not containing groundwater and to prevent the pollution or harmful alteration of the character of the water in any groundwater reservoir.

(g)  A district shall require water wells exempted under this section to be registered with the district before drilling. All exempt water wells shall be equipped and maintained so as to conform to the district's rules requiring installation of casing, pipe, and fittings to prevent the escape of groundwater from a groundwater reservoir to any reservoir not containing groundwater and to prevent the pollution or harmful alteration of the character of the water in any groundwater reservoir.

SECTION 4.33.  Subchapter D, Chapter 36, Water Code, is amended by adding Section 36.122 to read as follows:

SECTION 4.34.  Subchapter E, Chapter 36, Water Code, is amended by adding Sections 36.159, 36.160, and 36.161 to read as follows:

SECTION 4.35.  Subchapter G, Chapter 36, Water Code, is amended by adding Sections 36.206 and 36.207 to read as follows:

SECTION 4.36.  Subchapter I, Chapter 36, Water Code, is amended to read as follows:

SUBCHAPTER I. PERFORMANCE REVIEW AND DISSOLUTION [OF DISTRICT]

Sec. 36.304 [36.301].  DISSOLUTION OF DISTRICT. (a)  The [After notice and hearing, the] commission may dissolve a district that:

(1)  is not operational, as determined under Section 36.302 [has been inactive for a period of three consecutive years]; and

(2)  has no outstanding bonded indebtedness.

(b)  A district composed of territory entirely within one county may be dissolved even if the district [it] has outstanding indebtedness that matures after the year in which the district is dissolved, whereupon the commissioners court shall levy and collect taxes on all taxable property in the district in an amount sufficient to pay the principal of and interest on the indebtedness when due. The taxes shall be levied and collected in the same manner as county taxes.

[(c)  A district is considered active if:

[(1)  the district has a board as required by Subchapter D;

[(2)  the board holds regularly scheduled meetings and has on file minutes of its meetings;

[(3)  the district has developed and filed with the commission a management plan for the district;

[(4)  the district has copies of drillers' logs on file;

[(5)  the district has on file well permits issued by the district; and

[(6)  the district has on file annual district audits.]

Sec. 36.305 [36.302].  NOTICE OF HEARING FOR DISSOLUTION OF BOARD OR DISTRICT. (a)  The commission shall give notice of the [dissolution] hearing for dissolution of a district or of a board which briefly describes the reasons for the proceeding.

(b)  The notice shall be published once each week for two consecutive weeks before the day of hearing in a [some] newspaper having general circulation in the county or counties in which the district is located. The first publication shall be 30 days before the day of the hearing.

(c)  The commission shall give notice of the hearing by first class mail addressed to the directors of the district according to the last record on file with the executive director.

Sec. 36.306 [36.303].  INVESTIGATION. The executive director shall investigate the facts and circumstances of any violations of any rule or order of the commission or any provisions of this chapter and shall prepare and file a written report with the commission and district and include any actions the executive director believes the commission should take under Section 36.303.

Sec. 36.307.  ORDER OF DISSOLUTION OF BOARD. If the commission enters an order to dissolve the board, the commission shall notify the county commissioners court of each county which contains territory in the district and the commission shall provide that temporary directors be appointed under Section 36.016 to serve until an election for a new board can be held under Section 36.017, provided, however, that district confirmation shall not be required for continued existence of the district and shall not be an issue in the election [the district to be dissolved and the result of the investigation shall be included in a written report].

[Sec. 36.304.  ORDER OF DISSOLUTION. The commission may enter an order dissolving the district at the conclusion of the hearing if it finds that the district has performed none of the functions for which it was created for a period of three consecutive years before the day of the proceeding and that the district has no outstanding bonded indebtedness.]

Sec. 36.308 [36.305].  CERTIFIED COPY OF ORDER. The commission shall file a certified copy of the order of dissolution of the district in the deed records of the county or counties in which the district is located. If the district was created by a special Act of the legislature, the commission shall file a certified copy of the order of dissolution with the secretary of state.

Sec. 36.309 [36.306].  APPEALS. [(a)]  Appeals from any [a] commission order [dissolving a district] shall be filed and heard in the district court of any of the counties in which the land is located.

[(b)  The trial on appeal shall be de novo and the substantial evidence rule shall not apply.]

Sec. 36.310 [36.307].  ASSETS ESCHEAT [TO STATE]. Upon the dissolution of a district by the commission, all assets of the district shall be sold at public auction and the proceeds given to the county if it is a single-county district. If it is a multicounty district, the proceeds shall be divided with the counties in proportion to the surface land area in each county served by the district [escheat to the State of Texas. The assets shall be administered by the state treasurer and shall be disposed of in the manner provided by Chapter 72, Property Code].

SECTION 4.37.  Subsection (b), Section 36.325, Water Code, is amended to read as follows:

(b)  The petition must be signed by:

(1)  a majority of the landowners in the territory;

(2)  at least 50 landowners if the number of landowners is more than 50; or

(3)  the commissioners court of the county in which the area is located if the area is identified as a priority groundwater management [critical] area or includes the entire county. The petition must describe the land by legal description or by metes and bounds or by lot and block number if there is a recorded plat of the area to be included in the district.

SECTION 4.38.  Section 36.331, Water Code, is amended to read as follows:

Sec. 36.331.  ANNEXATION OF NONCONTIGUOUS TERRITORY. Land not contiguous to the existing boundaries of a district may not be added to or annexed to a district unless the land is located either within the same management area, priority groundwater management [critical] area, or a groundwater subdivision designated by the commission or its predecessors.

SECTION 4.39.  Chapter 36, Water Code, is amended by adding Subchapter L to read as follows:

SECTION 4.40.  Subsection (g), Section 151.318, Tax Code, is amended to read as follows:

(g)  Each person engaged in manufacturing, processing, fabricating, or repairing tangible personal property for ultimate sale is entitled to a refund or a reduction in the amount of tax imposed by this chapter as provided by Subsection (h) for the purchase of machinery, equipment, and replacement parts or accessories with a useful life in excess of six months if the equipment is:

(1)  used or consumed in or during the actual manufacturing, processing, fabrication, or repair of tangible personal property for ultimate sale, and the use or consumption of the property is necessary or essential to the manufacturing, processing, fabrication, or repair operation, or to a pollution control process; or

(C)  treat wastewater from another industrial or municipal source for the purpose of replacing existing freshwater sources in the manufacturing, processing, fabrication, or repair operation.

SECTION 4.41.  Subchapter D, Chapter 5, Water Code, is amended by adding Section 5.1035 to read as follows:

SECTION 4.42.  Section 5.235, Water Code, is amended by adding Subsection (o) to read as follows:

SECTION 4.43.  Subsection (a), Section 26.121, Water Code (effective until delegation of NPDES permit authority), is amended to read as follows:

(a)  Except as authorized by a rule, permit, or order issued by the commission, no person may:

(1)  discharge sewage, municipal waste, recreational waste, agricultural waste, or industrial waste into or adjacent to any water in the state;

(2)  discharge other waste into or adjacent to any water in the state which in itself or in conjunction with any other discharge or activity causes, continues to cause, or will cause pollution of any of the water in the state, unless the discharge complies with the person's:

(A)  certified water quality management plan approved by the State Soil and Water Conservation Board as provided by Section 201.026, Agriculture Code; or

(B)  water pollution and abatement plan approved by the commission; or

(3)  commit any other act or engage in any other activity which in itself or in conjunction with any other discharge or activity causes, continues to cause, or will cause pollution of any of the water in the state, unless the activity is under the jurisdiction of the Parks and Wildlife Department, the General Land Office, or the Railroad Commission of Texas, in which case this subdivision does not apply.

SECTION 4.44.  Subsection (a), Section 26.121, Water Code (effective upon delegation of NPDES permit authority), is amended to read as follows:

(a)  Except as authorized by the commission, no person may:

(1)  discharge sewage, municipal waste, recreational waste, agricultural waste, or industrial waste into or adjacent to any water in the state;

(2)  discharge other waste into or adjacent to any water in the state which in itself or in conjunction with any other discharge or activity causes, continues to cause, or will cause pollution of any of the water in the state, unless the discharge complies with a person's:

(A)  certified water quality management plan approved by the State Soil and Water Conservation Board as provided by Section 201.026, Agriculture Code; or

(B)  water pollution and abatement plan approved by the commission; or

(3)  commit any other act or engage in any other activity which in itself or in conjunction with any other discharge or activity causes, continues to cause, or will cause pollution of any of the water in the state, unless the activity is under the jurisdiction of the Parks and Wildlife Department, the General Land Office, or the Railroad Commission of Texas, in which case this subdivision does not apply.

SECTION 4.45.  Subchapter D, Chapter 51, Water Code, is amended by adding Section 51.196 to read as follows:

SECTION 4.46.  Subchapter L, Chapter 51, Water Code, is amended by adding Section 51.534 to read as follows:

SECTION 4.47.  Subsections (a) and (c), Section 401.002, Local Government Code, are amended to read as follows:

(a)  A home-rule municipality may prohibit the pollution or degradation of and may police a stream, drain, recharge feature, recharge area, or tributary that may constitute or recharge the source of water supply of any municipality.

(c)  The authority granted by this section may be exercised inside [or outside] the municipality's boundaries or inside the municipality's extraterritorial jurisdiction or outside the municipality's extraterritorial jurisdiction only if required to meet other state or federal requirements. The authority granted by this section for the protection of recharge, recharge areas, or recharge features of groundwater aquifers may be exercised outside the municipality's boundaries and within the extraterritorial jurisdiction provided the municipality exercising such authority has a population greater than 750,000 and the groundwater constitutes more than 75 percent of the municipality's source of water supply.

SECTION 4.48.  (a)  Sections 35.010, 35.011, and 35.016, Water Code, are repealed.

(b)  Section 5.02, Chapter 133, Acts of the 69th Legislature, Regular Session, 1985, is repealed.

SECTION 4.49.  (a)  In this section, "district" means a groundwater conservation district created under Section 52, Article III, or Section 59, Article XVI, Texas Constitution, that has the authority to regulate the spacing of water wells, the production from water wells, or both.

(b)  Notwithstanding the time limitation under Subsection (a), Section 36.1072, Water Code, as added by this Act, and notwithstanding any provision to the contrary in prior law, a district which was created or, if the district required a confirmation election, a district whose creation was confirmed before the effective date of this Act shall submit a management plan for certification under Section 36.1072, Water Code, as added by this Act, to the Texas Water Development Board not later than September 1, 1998.

(c)  Notwithstanding any provision to the contrary in prior law and in addition to existing powers and duties, a district that was created by special law, or whose creation was confirmed by an election required by the special law, before the effective date of this Act:

(1)  in deciding whether or not to issue a permit and in setting the terms of the permit, shall consider matters set forth under Subsections (d) and (e), Section 36.113, Water Code, as amended by this Act, including, without limitation, whether the proposed use of water is consistent with the district's certified water management plan; and

(2)  may use funds obtained from permit fees collected pursuant to the special law for any purpose consistent with the district's certified water management plan including, without limitation, making grants, loans, or contractual payments to achieve, facilitate, or expedite reductions in groundwater pumping or the development or distribution of alternative water supplies.

SECTION 4.50.  An area designated as a critical area under Chapter 35, Water Code, as it existed before the effective date of this Act, or under other prior law, shall be known and referred to as a priority groundwater management area on or after the effective date of this Act.

SECTION 4.51.  Not later than September 1, 1998, the Texas Natural Resource Conservation Commission must, under Chapter 35, Water Code, as amended by this Act, make all designations of priority groundwater management areas for which critical area reports were required to have been completed before the effective date of this Act under Section 35.007, Water Code, as that section existed immediately before the effective date of this Act.

ARTICLE 5. FINANCIAL ASSISTANCE FOR WATER NEEDS AND

CONSERVATION

SECTION 5.01.  Section 15.431, Water Code, is amended by amending Subsection (d) and adding Subsection (g) to read as follows:

(d)  Money appropriated by the legislature to be maintained as principal in the fund, $10 million of the money transferred to that fund by H.B. No. 2, Acts of the 69th Legislature, Regular Session, 1985, and half of the money earned as interest on the money held as principal in the agricultural trust fund shall be maintained as principal. Money maintained as principal in the agricultural trust fund may [not] be used by the board to make conservation loans to borrower districts and loans to lender districts for the purposes listed in Section 17.895 of this code. Loans and conservation loans made under this subchapter are subject to the provisions of Sections 17.896 through 17.903 of this code. Repayments of principal and interest on loans and conservation loans made under this subchapter shall be deposited in the agricultural trust fund [spent for any purpose].

SECTION 5.02.  Section 16.189, Water Code, is amended to read as follows:

Sec. 16.189.  LEASE PAYMENTS. In leasing a state facility for a term of years, the board shall require [annual] payments that will recover over the lease period not less than the total of:

(1)  all [the annual] principal and interest requirements applicable to the debt incurred by the state in acquiring the facility; and

(2)  the state's [annual] cost for operation, maintenance, and rehabilitation of the facility.

SECTION 5.03.  Chapter 17, Water Code, is amended by adding Subchapter L to read as follows:

SECTION 5.04.  Subdivision (7), Section 17.001, Water Code, is amended to read as follows:

(7)  "Water supply project" means:

(A)  any engineering undertaking or work to conserve and develop [surface or subsurface] water resources of the state, including the control, storage, and preservation of its storm water and floodwater and the water of its rivers and streams for all useful and lawful purposes by the acquisition, improvement, extension, or construction of dams, reservoirs, brush control, precipitation enhancement, desalinization, and other water storage and conservation projects, which may include flood storage, including underground storage projects, filtration and water treatment plants, including any system necessary to transport water from storage to points of distribution or from storage to filtration and treatment plants, including facilities for transporting water therefrom to wholesale purchasers or to retail purchasers as authorized by Section 17.072(c) of this code, by the acquisition, by purchase of rights in [underground] water, by the drilling of wells, or for any one or more of these purposes or methods; [or]

(B)  any engineering undertaking or work outside the state to provide for the maintenance and enhancement of the quality of water by eliminating saline inflow through well pumping and deep well injection of brine if such undertaking or work results in water being available for use in or for the benefit of Texas;

(D)  a channel storage reservoir located on an international boundary between Texas and Mexico that develops the water resources of Texas and the research, planning, and actions necessary to obtain regulatory authority at the local, state, and federal level.

SECTION 5.05.  Section 17.001, Water Code, is amended by amending Subdivision (17) and adding Subdivision (25) to read as follows:

(17)  "Financial assistance" means any loan of funds from the water supply account, the water quality enhancement account, or the flood control account to a political subdivision for construction of a water supply project, including projects referenced in the state water plan, treatment works, or flood control measures through the purchase of bonds or other obligations of the political subdivision, and any loan of funds the source of which is the proceeds from water financial assistance bonds.

SECTION 5.06.  Section 17.011, Water Code, is amended by adding Subsection (c) to read as follows:

SECTION 5.07.  Section 17.0111, Water Code, is amended to read as follows:

Sec. 17.0111.  DEDICATION OF CERTAIN BONDS. No more than $250 million in principal [Fifty percent of the] amount of bonds authorized by Article III, Section 49-d-7, of the Texas Constitution, and issued under either that section or Article III, Section 49-d-8, of the Texas Constitution, may be [is] dedicated to the purposes provided by Subchapter K [of this chapter].

SECTION 5.08.  Section 17.182, Water Code, is amended to read as follows:

Sec. 17.182.  PROCEEDS FROM SALE. Unless used to pay debt service on bonds issued under this chapter, the proceeds from the sale of political subdivision bonds held by the board either shall be credited to the account from which financial assistance was made to the political subdivision, except that accrued interest shall be credited to the interest and sinking fund, or shall be deposited to the credit of the Texas Water Development Fund II, established within the state treasury pursuant to Section 49-d-8, Article III, Texas Constitution. However, no such proceeds shall be deposited to the credit of the Texas Water Development Fund II unless the executive administrator certifies to the board that the transfer of such proceeds into the Texas Water Development Fund II will not cause the board, in the fiscal year the transfer is made, to direct the comptroller to transfer out of the first money coming into the state treasury during that fiscal year funds sufficient for the payment of principal of or interest on water development bonds, other than water development bonds issued for the purposes described in Subsection (e), Section 49-d-7, Article III, Texas Constitution, coming due in that fiscal year.

SECTION 5.09.  Section 17.278, Water Code, is amended to read as follows:

Sec. 17.278.  FINDINGS REGARDING PERMITS. If an application includes a proposal for a wastewater treatment plant, the board may not deliver funds for the wastewater treatment plant until the applicant has obtained a permit for the construction and operation of the plant and approval of the plans and specifications for the plant from the commission. If an application includes a proposal for a wastewater treatment plant that is located outside the jurisdiction of this state and that is not subject to the permitting authority of the commission, the board may not deliver funds for the wastewater treatment plant until after the board reviews the plans and specifications in coordination with the commission and finds that the wastewater treatment plant is capable of producing effluent that will meet federal and Texas-approved water quality standards and if effluent produced will result in water being available for use in or for the benefit of Texas.

SECTION 5.10.  Sections 44.007 through 44.010, Agriculture Code, are amended to read as follows:

Sec. 44.007.  LINKED DEPOSIT PROGRAM. (a)  The board shall establish a linked deposit program to encourage commercial lending for the enhanced production, processing, and marketing of certain agricultural crops and for the financing [purchase] of water conservation projects or equipment for agricultural production purposes.

(b)  The board shall promulgate rules for the loan portion of the linked deposit program. The rules must include:

(1)  a list of the categories of crops customarily grown in Texas;

(2)  a list of crops that are alternative agricultural crops;

(3)  a list of crops the production of which has declined markedly because of natural disasters; and

(4)  identification of projects and [the] types of equipment considered as water conservation projects or equipment for agricultural production purposes.

(c)  In order to participate in the linked deposit program, an eligible lending institution may solicit loan applications from eligible borrowers.

(d)  After reviewing an application and determining that the applicant is eligible and creditworthy, the eligible lending institution shall send the application for a linked deposit loan to the board or the administrator of the Texas Agricultural Finance Authority.

(e)  The eligible lending institution shall certify the interest rate applicable to the specific eligible borrower and attach it to the application sent to the board or the administrator of the Texas Agricultural Finance Authority.

(f)  After reviewing each linked deposit loan application, the board shall recommend to the comptroller [state treasurer] the acceptance or rejection of the application.

(g)  After acceptance of the application, the comptroller [state treasurer] shall place a linked deposit with the applicable eligible lending institution for the period the comptroller [treasurer] considers appropriate. The comptroller [state treasurer] may not place a deposit for a period extending beyond the state fiscal biennium in which it is placed. Subject to the limitation described by Section 44.010 of this chapter, the comptroller [treasurer] may place time deposits at an interest rate described by Section 44.001(5)(A) of this chapter, notwithstanding any order of the State Depository Board to the contrary.

(h)  Before the placing of a linked deposit, the eligible lending institution and the state, represented by the comptroller [state treasurer] and the board, shall enter into a written deposit agreement containing the conditions on which the linked deposit is made.

(i)  If a lending institution holding linked deposits ceases to be a state depository, the comptroller [state treasurer] may withdraw the linked deposits.

(j)  The board may adopt rules that create a procedure for determining priorities for loans granted under this chapter. Each rule adopted must state the policy objective of the rule. The policy objectives of the rules may include preferences to:

(1)  achieve adequate geographic distribution of loans;

(2)  assist certain industries;

(3)  encourage certain practices including water conservation; and

(4)  encourage value-added processing of agricultural products.

Sec. 44.008.  COMPLIANCE. (a)  On accepting a linked deposit, an eligible lending institution must loan money to eligible borrowers in accordance with the deposit agreement and this chapter. The eligible lending institution shall forward a compliance report to the board.

(b)  The board shall monitor compliance with this chapter and inform the comptroller [state treasurer] of noncompliance on the part of an eligible lending institution.

Sec. 44.009.  STATE LIABILITY PROHIBITED. The state is not liable to an eligible lending institution for payment of the principal, interest, or any late charges on a loan made to an eligible borrower. A delay in payment or default on a loan by an eligible borrower does not affect the validity of the deposit agreement. Linked deposits are not an extension of the state's credit within the meaning of any state constitutional prohibition.

Sec. 44.010.  LIMITATIONS IN PROGRAM. (a)  At any one time, not more than $15 [$5] million, of which $10 million may only be used to finance water conservation projects, may be placed in linked deposits under this chapter.

(b)  The maximum amount of a loan under this chapter to process and market Texas agricultural crops is $500,000. The maximum amount of a loan under this chapter to produce alternative agricultural crops in this state is $250,000. The maximum amount of a loan under this chapter to finance [purchase] water conservation projects or equipment for agricultural production purposes is $250,000.

(c)  A loan granted pursuant to this chapter must be applied to the purchase or lease of land, equipment, seed, fertilizer, direct marketing facilities, or processing facilities, or to payment for professional services.

SECTION 5.11.  Subchapter B, Chapter 11, Tax Code, is amended by adding Section 11.32 to read as follows:

SECTION 5.12.  Section 2155.444, Government Code, is amended by adding Subsection (d) to read as follows:

SECTION 5.13.  Subchapter E, Chapter 13, Water Code, is amended by adding Section 13.143 to read as follows:

ARTICLE 6. SMALL COMMUNITIES ASSISTANCE

SECTION 6.01.  Section 5.311, Water Code, is amended to read as follows:

Sec. 5.311.  DELEGATION OF RESPONSIBILITY. (a)  The commission may delegate to an administrative law judge of the State Office of Administrative Hearings the responsibility to hear any matter before the commission and to issue interlocutory orders related to interim rates under Chapter 13.

(b)  Except as provided in Subsection (a), the [The] administrative law judge shall report to the commission on the hearing in the manner provided by law.

SECTION 6.02.  Subdivisions (11), (21), and (24), Section 13.002, Water Code, are amended to read as follows:

(11)  "Member" means a person who holds a membership in a water supply or sewer service corporation and [who either receives water or sewer utility service from the corporation or] is a record owner of a fee simple title to property in an area served by a water supply or sewer service corporation or a person who is granted a membership and who either currently receives or will be eligible to receive water or sewer utility service from the corporation. In determining member control of a water supply or sewer service corporation, a person is entitled to only one vote regardless of the number of memberships the person owns.

(21)  "Service" means any act [done, rendered, or] performed, anything furnished or supplied, and any facilities or lines committed or [facility] used[, furnished, or supplied] by a retail public utility in the performance of its duties under this chapter to its patrons, employees, other retail public utilities, and the public, as well as the interchange of facilities between two or more retail public utilities.

(24)  "Water supply or sewer service corporation" means a nonprofit[, member-owned, member-controlled] corporation organized and operating under Chapter 76, Acts of the 43rd Legislature, 1st Called Session, 1933 (Article 1434a, Vernon's Texas Civil Statutes) that provides potable water service or sewer service for compensation and that has adopted and is operating in accordance with by-laws or articles of incorporation which ensure that it is member-owned and member-controlled. The term does not include a corporation that provides retail water or sewer service to a person who is not a member, except that the corporation may provide retail water or sewer service to a person who is not a member if the person only builds on or develops property to sell to another and the service is provided on an interim basis before the property is sold.

SECTION 6.03.  Section 13.181, Water Code, is amended to read as follows:

Sec. 13.181.  POWER TO ENSURE COMPLIANCE; RATE REGULATION. (a)  Except for the provisions of Section 13.192, this subchapter shall apply only to a utility and shall not be applied to municipalities, counties, districts, or water supply or sewer service corporations.

(b)  Subject to this chapter, the commission has all authority and power of the state to ensure compliance with the obligations of utilities under this chapter. For this purpose the regulatory authority may fix and regulate rates of utilities, including rules and regulations for determining the classification of customers and services and for determining the applicability of rates. A rule or order of the regulatory authority may not conflict with the rulings of any federal regulatory body. [Except Section 13.192, this subchapter shall apply only to a utility and shall not be applied to municipalities, counties, districts, or water supply or sewer service corporations.] The commission may adopt rules which authorize a utility which is permitted under Section 13.242(c) to provide service without a certificate of public convenience and necessity to request or implement a rate increase and operate according to rules, regulations, and standards of service other than those otherwise required under this chapter provided that rates are just and reasonable for customers and the utility and that service is safe, adequate, efficient, and reasonable.

SECTION 6.04.  Section 13.183, Water Code, is amended by adding Subsection (c) to read as follows:

SECTION 6.05.  Subsection (a), Section 13.184, Water Code, is amended to read as follows:

(a)  Unless the commission establishes alternate rate methodologies in accordance with Section 13.183(c), the commission [The regulatory authority] may not prescribe any rate that will yield more than a fair return on the invested capital used and useful in rendering service to the public. The governing body of a municipality exercising its original jurisdiction over rates and services may use alternate ratemaking methodologies established by ordinance or by commission rule in accordance with Section 13.183(c). Unless the municipal regulatory authority uses alternate ratemaking methodologies established by ordinance or by commission rule in accordance with Section 13.183(c), it may not prescribe any rate that will yield more than a fair return on the invested capital used and useful in rendering service to the public.

SECTION 6.06.  Subsection (a), Section 13.185, Water Code, is amended to read as follows:

(a)  Unless alternate methodologies are adopted as provided in Sections 13.183(c) and 13.184(a), the [The] components of invested capital and net income shall be determined according to the rules stated in this section.

SECTION 6.07.  Subchapter G, Chapter 13, Water Code, is amended by adding Section 13.241 to read as follows:

SECTION 6.08.  Section 13.246, Water Code, is amended to read as follows:

Sec. 13.246.  NOTICE AND HEARING; ISSUANCE OR REFUSAL; FACTORS CONSIDERED. (a)  If an application for a certificate of public convenience and necessity is filed, the commission shall cause notice of the application to be given to affected parties and, if requested, shall fix a time and place for a hearing and give notice of the hearing. Any person affected by the application may intervene at the hearing.

(b)  The commission may grant applications and issue certificates only if the commission finds that a certificate is necessary for the service, accommodation, convenience, or safety of the public. The commission may issue a certificate as requested, or refuse to issue it, or issue it for the construction of only a portion of the contemplated system or facility or extension, or for the partial exercise only of the right or privilege and may impose special conditions necessary to ensure that continuous and adequate service is provided.

(c)  Certificates of convenience and necessity shall be granted on a nondiscriminatory basis after consideration by the commission of the adequacy of service currently provided to the requested area, the need for additional service in the requested area, the effect of the granting of a certificate on the recipient of the certificate and on any retail public utility of the same kind already serving the proximate area, the ability of the applicant to provide adequate service, the feasibility of obtaining service from an adjacent retail public utility, the financial stability of the applicant, including, if applicable, the adequacy of the applicant's debt-equity ratio, environmental integrity, and the probable improvement of service or lowering of cost to consumers in that area resulting from the granting of the certificate.

SECTION 6.09.  Section 13.253, Water Code, is amended to read as follows:

Sec. 13.253.  IMPROVEMENTS IN SERVICE; INTERCONNECTING SERVICE. (a)  After notice and hearing, the commission may:

(1)  order any retail public utility that is required by law to possess a certificate of public convenience and necessity or any retail public utility that possesses a certificate of public convenience and necessity and is located in an affected county as defined in Section 16.341 to:

(A)  provide specified improvements in its service in a defined area if service in that area is inadequate or is substantially inferior to service in a comparable area and it is reasonable to require the retail public utility to provide the improved service; or

(B)  develop, implement, and follow financial, managerial, and technical practices that are acceptable to the commission to ensure that continuous and adequate service is provided to any areas currently certificated to the retail public utility if the retail public utility has not provided continuous and adequate service to any of those areas and, for a utility, to provide financial assurance of the utility's ability to operate the system in accordance with applicable laws and rules, in the form of a bond or other financial assurance in a form and amount specified by the commission;

(2)  order two or more public utilities or water supply or sewer service corporations to establish specified facilities for [the] interconnecting service; [or]

(3)  order a public utility or water supply or sewer service corporation that has not demonstrated that it can provide continuous and adequate service from its drinking water source or sewer treatment facility to obtain service sufficient to meet its obligation to provide continuous and adequate service on at least a wholesale basis from another consenting utility service provider; or

(4)  issue an emergency order, with or without a hearing, under Section 13.041 [of this code].

SECTION 6.10.  Section 13.254, Water Code, is amended to read as follows:

Sec. 13.254.  REVOCATION OR AMENDMENT OF CERTIFICATE. (a)  The commission at any time after notice and hearing may revoke or amend any certificate of public convenience and necessity with the written consent of the certificate holder or if it finds that:

(1)  the certificate holder has never provided, is no longer providing, or has failed to provide continuous and adequate service in the area, or part of the area, covered by the certificate;

(4)  the certificate holder has failed to file a cease and desist action pursuant to Section 13.252 within 180 days of the date that it became aware that another retail public utility was providing service within its service area, unless the certificate holder demonstrates good cause for its failure to file such action within the 180 days.

(b)  Upon written request from the certificate holder, the executive director may cancel the certificate of a utility or water supply corporation authorized by rule to operate without a certificate of public convenience and necessity under Section 13.242(c).

(c)  If the certificate of any retail public utility is revoked or amended, the commission may require one or more retail public utilities with their consent to provide service in the area in question. The order of the commission shall not be effective to transfer property.

SECTION 6.11.  Section 13.301, Water Code, is amended to read as follows:

Sec. 13.301.  REPORT OF SALE, MERGER, ETC.; INVESTIGATION; DISALLOWANCE OF TRANSACTION. (a)  A utility or a water supply or sewer service corporation, on or before the 120th day before the effective date of a sale, acquisition, lease, or rental of a water or sewer system that is required by law to possess a certificate of public convenience and necessity or the effective date of a merger or consolidation with such a utility or water supply or sewer service corporation, shall:

(1)  file a written application with [notify] the commission; and

(2)  [give public notice] unless public notice is waived by the executive director for good cause shown, give public notice of the action [at least 120 days before the effective date of any sale, acquisition, lease, or rental of any water or sewer system required by law to possess a certificate of public convenience and necessity or of any merger or consolidation with such a utility or water supply or sewer service corporation].

(b)  The commission may require that the person purchasing or acquiring the water or sewer system demonstrate adequate financial, managerial, and technical capability for providing continuous and adequate service to the requested area and any areas currently certificated to the person.

(d)  The commission shall, with or without a public hearing, investigate the sale, acquisition, lease, or rental to determine whether the transaction will serve the public interest.

(e) [(c)]  Before the expiration of the 120-day notification period, the executive director shall notify all known parties to the transaction of the executive director's decision whether to request that the commission hold a public hearing to determine if the transaction will serve the public interest. The executive director may request a hearing if:

(1)  the application filed with [notification to] the commission or the public notice was improper;

(2)  the person purchasing or acquiring the water or sewer system has not demonstrated adequate financial, managerial, and technical capability for providing continuous and adequate service to the service area being acquired and to any areas currently certificated to the person [is inexperienced as a utility service provider];

(3)  the person or an affiliated interest of the person purchasing or acquiring the water or sewer system has a history of:

(A)  noncompliance with the requirements of the commission or the Texas Department of Health; or

(B)  [of] continuing mismanagement or misuse of revenues as a utility service provider;

(4)  the person purchasing or acquiring the water or sewer system cannot demonstrate the financial ability to provide the necessary capital investment to ensure the provision of continuous and adequate service to the customers of the water or sewer system; or

(5)  there are concerns that the transaction may not serve the public interest, after the application of the considerations provided by Section 13.246(c) for determining whether to grant a certificate of convenience and necessity.

(f) [(d)]  Unless the executive director requests that a public hearing be held, the sale, acquisition, lease, or rental may be completed as proposed:

(1)  at the end of the 120-day period; or

(2)  [may be completed] at any time after the executive director notifies the utility or water supply or sewer service corporation that a hearing will not be requested.

(g)  If a hearing is requested or if the utility or water supply or sewer service corporation fails to make the application as [provide the] required [notification] or to provide public notice, the sale, acquisition, lease, or rental may not be completed unless the commission determines that the proposed transaction serves the public interest.

(h)  A sale, acquisition, lease, or rental of any water or sewer system required by law to possess a certificate of public convenience and necessity that is not completed in accordance with the provisions of this section is void.

(i) [(e)]  This section does not apply to:

(1)  the purchase of replacement property; or

(2)  [to] a transaction under Section 13.255 of this code.

(j) [(f)]  If a public utility facility or system is sold and the facility or system was partially or wholly constructed with customer contributions in aid of construction derived from specific surcharges approved by the regulatory authority over and above revenues required for normal operating expenses and return, the public utility may not sell or transfer any of its assets, its certificate of convenience and necessity, or its controlling interest in an incorporated utility, unless the utility provides to the purchaser or transferee before the date of the sale or transfer a written disclosure relating to the contributions. The disclosure must contain, at a minimum, the total dollar amount of the contributions and a statement that the contributed property or capital may not be included in invested capital or allowed depreciation expense by the regulatory authority in rate-making proceedings.

(k) [(g)]  A utility or a water supply or sewer service corporation that proposes to sell, assign, lease, or rent its facilities shall notify the other party to the transaction of the requirements of this section before signing an agreement to sell, assign, lease, or rent its facilities.

SECTION 6.12.  Section 13.302, Water Code, is amended to read as follows:

Sec. 13.302.  PURCHASE OF VOTING STOCK IN ANOTHER PUBLIC UTILITY:  REPORT. (a)  A utility may not purchase voting stock in another utility doing business in this state and a person may not acquire a controlling interest in a utility doing business in this state unless the person or utility files a written application with [notifies] the commission [of the proposed purchase or acquisition] not later than the 61st day before the date on which the transaction is to occur.

(b)  The commission may require that a person acquiring a controlling interest in a utility demonstrate adequate financial, managerial, and technical capability for providing continuous and adequate service to the requested area and any areas currently certificated to the person.

(d)  The executive director may request that the commission hold a public hearing on the transaction if the executive director believes that a criterion [criteria] prescribed by Section 13.301(e) [13.301(c) of this code] applies.

(e) [(c)]  Unless the executive director requests that a public hearing be held, the purchase or acquisition may be completed as proposed:

(1)  at the end of the 60-day period; or

(2)  [may be completed] at any time after the executive director notifies the person or utility that a hearing will not be requested.

(f)  If a hearing is requested or if the person or utility fails to make the application to the commission as [provide the] required [notification to the commission], the purchase or acquisition may not be completed unless the commission determines that the proposed transaction serves the public interest. A purchase or acquisition that is not completed in accordance with the provisions of this section is void.

SECTION 6.13.  Section 13.412, Water Code, is amended by amending Subsections (a) and (b) and adding Subsections (f) and (g) to read as follows:

(a)  At the request of the commission, the attorney general shall bring suit for the appointment of a receiver to collect the assets and carry on the business of a water or sewer utility that:

(1)  has abandoned operation of its facilities;

(3)  [or] violates a final order of the commission; or

(4)  allows any property owned or controlled by it to be used in violation of a final order of the commission.

(b)  The court shall appoint a receiver if an appointment is necessary:

(1)  to guarantee the collection of assessments, fees, penalties, or interest;

(2)  to guarantee continuous and adequate [continued] service to the customers of the utility; or

(3)  to prevent continued or repeated violation of the final order.

SECTION 6.14.  Subsections (a) and (c), Section 13.4132, Water Code, are amended to read as follows:

(a)  The commission, after providing to the utility notice and an opportunity to be heard by the commissioners at a commission meeting [for a hearing], may authorize a willing person to temporarily manage and operate a utility if the utility:

(1)  [that] has discontinued or abandoned operations or the provision of services; or

(2)  has been or is being referred to the attorney general for the appointment of a receiver under Section 13.412 [of this code].

(c)  A person appointed under this section has the powers and duties necessary to ensure the continued operation of the utility and the provision of continuous and adequate services to customers, including the power and duty to:

(1)  read meters;

(2)  bill for utility services;

(3)  collect revenues;

(4)  disburse funds; [and]

(5)  access all system components; and

(6)  request rate increases.

SECTION 6.15.  Section 15.602, Water Code, is amended to read as follows:

Sec. 15.602.  DEFINITIONS. In this subchapter:

(1)  "Additional state revolving fund" means any state revolving fund hereafter established by the board to provide financial assistance to political subdivisions for public works in accordance with a capitalization grant program hereafter established by a federal agency or otherwise authorized by federal law.

(2)  "Authorized investments" means any authorized investments described in Section 404.024, Government Code.

(3)  "Community water system" means a public water system that:

(4)  "Construction" shall have the meaning assigned by the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.).

(6) [(4)]  "Federal Act" means the Federal Water Pollution Control Act, as amended (33 U.S.C. 1251 et seq.).

(8) [(5)]  "Political subdivision" means a municipality, intermunicipal, interstate, or state agency, [or] any other public entity eligible for assistance under this subchapter, or a nonprofit water supply corporation created and operating under Chapter 76, Acts of the 43rd Legislature, 1st Called Session, 1933 (Article 1434a, Vernon's Texas Civil Statutes), if such entity is eligible for financial assistance under federal law establishing the state revolving fund or an additional state revolving fund.

(10) [(6)]  "Public works" means any project to acquire, construct, improve, repair, or otherwise provide any buildings, structures, facilities, equipment, or other real or personal property or improvements designed for public use, protection, or enjoyment undertaken by a political subdivision and paid for, in whole or in part, out of public funds.

(11) [(7)]  "Revolving fund" means the state water pollution control revolving fund.

(14) [(8)]  "Treatment works" has the meaning established by the federal act and the eligible components of the management programs established by Sections 319 and 320 of the federal act.

SECTION 6.16.  Subchapter J, Chapter 15, Water Code, is amended by adding Section 15.6041 to read as follows:

SECTION 6.17.  Subsections (c) and (g), Section 15.603, Water Code, are amended to read as follows:

(c)  The revolving fund consists of money derived from federal grants, direct appropriations, investment earnings on amounts credited to the revolving fund, and, at the board's discretion, from any and all sources available [to provide the required state match for the purposes of this subchapter].

(g)  The revolving fund and any accounts established in the revolving fund shall be kept and maintained by or at the direction of the board and do not constitute and are not a part of the State Treasury. However, at the direction of the board, the revolving fund or accounts in the revolving fund may be kept and held in escrow and in trust by the comptroller [State Treasurer] for and on behalf of the board, shall be used only as provided by this subchapter, and pending such use shall be invested in authorized investments as provided by any order, resolution, or rule of the board. Legal title to money and investments in the revolving fund is in the board unless or until paid out as provided by this subchapter, the federal act, and the rules of the board. The comptroller [State Treasurer], as custodian, shall administer the funds strictly and solely as provided by this subchapter and in the orders, resolutions, and rules, and the state shall take no action with respect to the revolving fund other than that specified in this subchapter, the federal act, and the rules of the board.

SECTION 6.18.  Subsection (a), Section 341.031, Health and Safety Code, is amended to read as follows:

(a)  Public drinking water must be free from deleterious matter and must comply with the standards established by the commission[, the United States Public Health Service,] or the United States Environmental Protection Agency. The commission may adopt and enforce rules to implement the federal Safe Drinking Water Act (42 U.S.C. Section 300f et seq.).

SECTION 6.19.  Subchapter C, Chapter 341, Health and Safety Code, is amended by adding Section 341.0315 to read as follows:

SECTION 6.20.  Subchapter C, Chapter 341, Health and Safety Code, is amended by amending Section 341.035 and adding Sections 341.0351 through 341.0356 to read as follows:

Sec. 341.035.  APPROVED PLANS REQUIRED FOR PUBLIC WATER SUPPLIES. (a)  Except as provided by Subsection (d), a person may not begin construction of a public drinking water supply system unless the executive director of the commission approves:

(c)  The prospective owner or operator of the proposed system shall provide to the commission [A person contemplating establishing a drinking water supply system for public use must submit] completed plans and specifications for review and approval in accordance with commission rules.

(4)  is a noncommunity nontransient water system and the person has demonstrated financial assurance under Chapter 361 or 382 of this code or Chapter 26, Water Code [to the commission before construction of the system. The commission shall approve plans that conform to the state's water safety laws. The water supply system may be established only on the commission's approval].

Sec. 341.0351.  NOTIFICATION OF SYSTEM CHANGES. [(b)]  Any person [agency], including a municipality, supplying a drinking water service to the public that intends to make a material or major change in a water supply system that may affect the sanitary features of that utility must give written notice of that intention to the commission before making the change.

Sec. 341.0352.  ADVERTISED QUALITY OF WATER SUPPLY. [(c)]  A water supply system owner, manager, or operator or an agent of a water supply system owner, manager, or operator may not advertise or announce a water supply as being of a quality other than the quality that is disclosed by the commission's latest rating.

Sec. 341.0353.  DRINKING WATER SUPPLY COMPARATIVE RATING INFORMATION. [(d)]  The commission shall assemble and tabulate all necessary information [data] relating to public drinking water supplies at least once each year and as often during the year as conditions demand or justify. The information [data] forms the basis of an official comparative rating of public drinking water supply systems.

Sec. 341.0354.  HIGHWAY SIGNS FOR APPROVED SYSTEM RATING. [(e)]  A water supply system that attains an approved rating is entitled to erect signs of a design approved by the commission on highways approaching the municipality in which the water supply system is located. The signs shall be immediately removed on notice from the commission if the water supply system does not continue to meet the specified standards.

SECTION 6.21.  Subsections (a) and (b), Section 341.047, Health and Safety Code, are amended to read as follows:

(a)  A person commits an offense if the person:

(1)  violates a provision of Section 341.031;

(2)  violates a provision of Section 341.032(a) or (b);

(3)  violates a provision of Section 341.033(a)-(f);

(4)  constructs a drinking water supply system without submitting completed plans and specifications as required by Section 341.035(c) [341.035(a)];

(5)  begins construction of [establishes] a drinking water supply system without the commission's approval as required by Section 341.035(a);

(6)  violates a provision of Section 341.0351 or 341.0352 [341.035(b) or (c)];

(7)  fails to remove a sign as required by Section 341.0354 [341.035(e)]; or

(8)  violates a provision of Section 341.036.

(b)  An offense under Subsection (a) is a Class C misdemeanor [punishable by a fine of not less than $100].

SECTION 6.22.  Subsections (b) through (i), Section 341.048, Health and Safety Code, are amended to read as follows:

(b)  A person who causes, suffers, allows, or permits a violation under this subchapter shall be assessed a civil penalty of not less than $50 nor more than $1,000 [$500] for each violation. Each day of a continuing violation is a separate violation.

(c)  [If it is shown on a trial of the defendant that the defendant has previously been assessed a civil penalty under this section within a year before the date on which the violation being tried occurred, the defendant shall be assessed a civil penalty of not less than $50 nor more than $1,000 for each subsequent violation under this subchapter. Each day of a continuing violation is a separate violation.

[(d)]  If it appears that a person has violated, is violating, or threatens to violate a provision under this subchapter, the commission, a county, or a municipality may institute a civil suit in a district court for:

(1)  injunctive relief to restrain the person from continuing the violation or threat of violation;

(2)  the assessment and recovery of a civil penalty; or

(3)  both injunctive relief and a civil penalty.

(d) [(e)]  The commission is a necessary and indispensable party in a suit brought by a county or municipality under this section.

(e) [(f)]  On the commission's request, the attorney general shall institute a suit in the name of the state for injunctive relief, to recover a civil penalty, or for both injunctive relief and civil penalty.

(f) [(g)]  The suit may be brought in:

(1)  Travis County;

(2)  [, in] the county in which the defendant resides; or

(3)  [, or in] the county in which the violation or threat of violation occurs.

(g) [(h)]  In a suit under this section to enjoin a violation or threat of violation of this subchapter, the court shall grant the state, county, or municipality, without bond or other undertaking, any injunction that the facts may warrant including temporary restraining orders, temporary injunctions after notice and hearing, and permanent injunctions.

(h) [(i)]  Civil penalties recovered in a suit brought under this section by a county or municipality shall be equally divided between:

(1)  the state; and

(2)  the county or municipality that first brought the suit.

SECTION 6.23.  Subsection (a), Section 341.049, Health and Safety Code, is amended to read as follows:

(a)  If a person causes, suffers, allows, or permits a violation of this subchapter or a rule or order adopted under this subchapter, the commission may assess a penalty against that person as provided by this section. The penalty shall not be less than $50 nor more than $1,000 [$500] for each violation. Each day of a continuing violation may be considered a separate violation.

SECTION 6.24.  Section 1, Chapter 190, Acts of the 66th Legislature, Regular Session, 1979 (Article 1110f, Vernon's Texas Civil Statutes), is amended to read as follows:

Sec. 1.  Purpose. The purpose of this Act is to clarify the authority of public entities that are lawfully authorized to engage in the collection, transportation, treatment, and disposal of sewage and the conservation, storage, transportation, treatment, and distribution of water, to join together as cotenants or coowners, or by concurrent resolution or ordinance, to create a public utility agency, to engage in the planning, financing, acquiring, constructing, owning, operating, and maintaining of facilities so that each public entity will owe all of the duties, will have and be secure in all of the rights, powers, and liabilities, and shall be entitled to all of the privileges and exemptions attributable to its undivided interest as a cotenant or coowner should the entities elect not to create a public utility agency, as provided by law with respect to an entire interest in facilities planned, financed, acquired, constructed, owned, operated, and maintained by it alone. These alternatives are to serve as a means of achieving economies of scale by providing essential water and sewage systems to the public and promoting the orderly economic development of the state while providing environmentally sound protection of future water and wastewater needs of the state and its inhabitants. The provisions of this Act shall be liberally construed to effectuate these purposes but shall not be construed to otherwise enlarge, change, or modify in any way the rights, powers, or authority of any public or private entity under existing law. Nothing in this Act shall be construed to alter, change, abrogate, or otherwise affect the existing contracts in force at the time this Act takes effect.

SECTION 6.25.  Section 2, Chapter 190, Acts of the 66th Legislature, 1979 (Article 1110f, Vernon's Texas Civil Statutes), is amended by amending Subsections (2), (3), and (4) to read as follows:

(2)  "Private entity" means any entity other than a public entity solely involved in financing, constructing, operating, and maintaining water and sewer facilities.

(3)  "Facilities" means facilities necessary or incidental to the collection, transportation, treatment, or disposal of sewage and to the conservation, storage, transportation, treatment, and distribution of water, including plant sites, rights-of-way, and real and personal property and equipment and rights of every kind useful in connection with collection, transportation, treatment, or disposal of sewage or with conservation, storage, transportation, treatment, and distribution of water.

(4)  "Public utility agency" or "agency" means any agency created under this Act by two or more public entities for the purpose of planning, financing, constructing, owning, operating, and maintaining facilities for the purpose of achieving economies of scale in providing water or sewer services.

SECTION 6.26.  Subsection (a), Section 3, Chapter 190, Acts of the 66th Legislature, 1979 (Article 1110f, Vernon's Texas Civil Statutes), is amended to read as follows:

(a)  To more readily accomplish the purposes of this Act, two or more public entities, by concurrent ordinances, may create an agency to be known as a public utility agency. The agency shall be without taxing power, and shall be a separate agency, a political subdivision of the state, and body politic and corporate exercising all of the powers that are conferred by Chapter 10, Title 28, Revised Civil Statutes of Texas, 1925, as amended, and this Act on a public entity. No agency is authorized to engage in any utility business other than the collection, transportation, treatment, or disposal of sewage or the conservation, storage, transportation, treatment, and distribution of water for the participating public entities that are joint owners with the agency of a facility located within the state. A public entity, at the time of the passage of the concurrent ordinance, must be one that has the authority to engage in the collection, transportation, treatment, or disposal of sewage or the conservation, storage, transportation, treatment, and distribution of water, but the entity may subsequently dispose of its facilities. Before the passage of a concurrent ordinance to create a public utility agency, the governing body of each public entity shall have notice of its intention to adopt the ordinance published in a newspaper of general circulation within the county in which the public entity is domiciled once a week for two consecutive weeks, the date of the first publication to be at least 14 days before the date set for the passage of the concurrent ordinance. The notice shall state the date, time, and place that the governing body proposes to pass the ordinance and that on the effective date of the concurrent ordinances the public entities adopting them shall have created a public utility agency. If, prior to the day set for the passage of a concurrent ordinance, 10 percent of the qualified electors of the particular public entity present a petition to the governing body requesting that a referendum election be called, the ordinance shall not become effective until a majority of the qualified electors of the entity voting in the election have approved the ordinance. The election shall be called and held in conformity with the Texas Election Code, as amended, Chapter 1, Title 22, Revised Civil Statutes of Texas, 1925, as amended, and this Act. Except as provided in this Act, a concurrent ordinance shall not be subject to a referendum election.

SECTION 6.27.  Subsections (f) and (g), Section 4, Chapter 190, Acts of the 66th Legislature, 1979 (Article 1110f, Vernon's Texas Civil Statutes), are amended to read as follows:

(f)  The agency may make contracts, leases, and agreements with and accept grants and loans from the United States of America, its departments and agencies, the State of Texas, its agencies, counties, municipalities, and political subdivisions, and public or private corporations and persons and may generally perform all acts necessary for the full exercise of the powers vested in the agency. Each agency may contract with those public entities creating the agency for the collection, transportation, treatment, and disposal of sewage or the conservation, storage, transportation, treatment, and distribution of water, and the authority to contract for these services shall also extend to private entities under terms and conditions the agency's board of directors may consider appropriate. The agency may sell, lease, convey, or otherwise dispose of any right, interest, or property that is, in its judgment, not needed for the efficient operation and maintenance of its facilities. The responsibility of the management, operation, and control of the properties belonging to the agency shall be vested in the board of directors.

(g)  The agency, in contracting with any public or private entity for wastewater collection, transmission, treatment, or disposal services or for water conservation, storage, transportation, treatment, and distribution, must charge rates sufficient to produce revenues adequate:

(1)  to pay all expenses of operation and maintenance;

(2)  to pay all interest and principal due on bonds issued as they become due and payable;

(3)  to pay the principal of and interest on any legal debt of the agency;

(4)  to pay all sinking and reserve fund payments as they become due and payable; and

(5)  to fulfill the terms of any agreements made with the holders of any bonds.

The agency may also establish a reasonable depreciation and emergency fund. Payments made pursuant to contracts with the agencies are to constitute an operating expense of the public or private entity served as a result of the contracts unless otherwise prohibited by a previously outstanding obligation of the purchasing entity.

SECTION 6.28.  Subchapter C, Chapter 13, Water Code, is amended by adding Section 13.045 to read as follows:

SECTION 6.29.  Subchapter D, Chapter 13, Water Code, is amended by adding Section 13.086 to read as follows:

SECTION 6.30.  Section 13.411, Water Code, is amended to read as follows:

Sec. 13.411.  Action to Enjoin or Require Compliance. (a)  If [it appears to] the commission has reason to believe that any retail public utility or any other person or corporation is engaged in or is about to engage in any act in violation of this chapter or of any order or rule of the commission entered or adopted under this chapter or that any retail public utility or any other person or corporation is failing to comply with this chapter or with any rule or order, the attorney general on request of the commission, in addition to any other remedies provided in this chapter, shall bring an action in a court of competent jurisdiction in the name of and on behalf of the commission against the retail public utility or other person or corporation to enjoin the commencement or continuation of any act or to require compliance with this chapter or the rule or order.

SECTION 6.31.  Section 13.418, Water Code, is amended to read as follows:

Sec. 13.418.  DISPOSITION OF FINES AND PENALTIES; WATER UTILITY IMPROVEMENT ACCOUNT. (a)  Fines and penalties collected under this chapter from a retail public utility that is not a public utility in other than criminal proceedings shall be paid to the commission and deposited in the general revenue fund.

(b)  Fines and penalties collected from a public utility under this chapter in other than criminal proceedings shall be paid to the commission and deposited in the water utility improvement account as provided by Section 341.0485, Health and Safety Code [General Revenue Fund].

SECTION 6.32.  Subchapter C, Chapter 341, Health and Safety Code, is amended by adding Section 341.0485 to read as follows:

SECTION 6.33.  Subchapter L, Chapter 49, Water Code, is amended by adding Section 49.352 to read as follows:

ARTICLE 7. WATER DATA COLLECTION AND DISSEMINATION

SECTION 7.01.  Section 16.012, Water Code, is amended to read as follows:

Sec. 16.012.  STUDIES, INVESTIGATIONS, SURVEYS. (a)  The executive administrator shall make studies, investigations, and surveys of the occurrence, quantity, quality, and availability of the surface water and groundwater of this state and shall, in cooperation with other entities of the state, guide the development of a statewide water resource data collection and dissemination network. For these purposes the executive administrator [staff] shall collect, receive, analyze, [and] process, and facilitate access to basic data and summary information concerning [the] water resources of the state and provide guidance regarding data formats and descriptions required to access and understand Texas water resource data.

(b)  The executive administrator shall:

(1)  determine suitable locations for future water facilities, including reservoir sites;

(2)  determine suitable, cost-effective water supply alternatives on a regional basis, including voluntary means of encouraging aggressive water conservation;

(3)  locate land best suited for irrigation;

(4) [(3)]  make estimates of the cost of proposed irrigation works and the improvement of reservoir sites;

(5) [(4)]  examine and survey reservoir sites; [and]

(6)  monitor [(5)  investigate] the effects of fresh water inflows upon the bays and estuaries of Texas;

(10)  make basic data and summary information developed under this subsection accessible to state agencies and other interested persons.

(c)  In performing the duties required under Subdivisions (1), (4), (5), (6), and (7) of Subsection (b), the executive administrator shall consider advice from the Parks and Wildlife Department.

(e)  The executive administrator shall keep full and proper records of his work, observations, data, and calculations, all of which are the property of the state.

(f) [(d)]  In performing his duties under this section, the executive administrator shall assist the commission in carrying out the purposes and policies stated in Section 12.014 of this code.

SECTION 7.02.  Section 16.021, Water Code, is amended to read as follows:

Sec. 16.021.  TEXAS NATURAL RESOURCES INFORMATION SYSTEM. (a)  The executive administrator shall establish the Texas Natural Resources Information System (TNRIS) to serve Texas agencies and citizens as a centralized clearinghouse and referral center for natural resource, census, and other socioeconomic data [as a centralized information system incorporating all Texas natural resource data, socioeconomic data related to natural resources, or indexes related to that data that is collected by state agencies or other entities].

(b)  The Texas Geographic Information Council (TGIC) [Natural Resources Information System Task Force] is created to provide strategic planning and coordination in the acquisition and use of geo-spatial data and related technologies in the State of Texas. The executive administrator and the executive director of the Department of Information Resources shall designate entities to be members of the TGIC. The chief administrative officer of each member entity shall select one representative to serve on the TGIC. The duties of the TGIC shall include providing guidance to the executive administrator in carrying out his duties under this section and guidance to the Department of Information Resources for development of rules related to statewide geo-spatial data and technology standards. [The task force is composed of one representative from each state agency designated by the executive administrator. The executive administrator shall designate a state agency as a participant in the task force if the agency collects or uses natural resource and related socioeconomic data. Representatives of each designated agency shall be selected by the chief administrative officer of that agency.]

(c)  Under the guidance of the TGIC [Texas Natural Resources Information System Task Force], the executive administrator shall:

(1)  further develop [and implement] the Texas Natural Resources Information System by promoting and providing for effective acquisition, archiving, documentation, indexing, and dissemination of natural resource and related digital and nondigital data and information;

(2)  obtain information in response to disagreements regarding names and name spellings for natural and cultural features in the state and provide this information to the Board on Geographic Names of the United States Department of the Interior;

(3)  make recommendations to the Board on Geographic Names of the United States Department of the Interior for naming any natural or cultural feature subject to the limitations provided by Subsection (d) of this section;

(6)  coordinate, conduct, and facilitate the development, maintenance, and use of mutually compatible statewide digital base maps depicting natural resources and man-made features.

(d)  A recommendation may not be made under Subdivision (3) of Subsection (c) of this section for:

(1)  a feature previously named under statutory authority or recognized by an agency of the federal government, the state, or a political subdivision of the state;

(2)  a feature located on private property for which consent of the property owner cannot be obtained; or

(3)  naming a natural or cultural feature for a living person.

SECTION 7.03.  On September 1, 1997, the Texas Natural Resources Information System Task Force and the Texas Geographic Information Systems Planning Council are merged into the Texas Geographic Information Council. All designated member agencies of both predecessor entities shall continue to serve as member agencies of the Texas Geographic Information Council.

ARTICLE 8. INTERIM COMMITTEE ON WATER RESOURCES

DEVELOPMENT AND MANAGEMENT

SECTION 8.01.  CREATION AND COMPOSITION. (a)  The Interim Committee on Water Resources Development and Management is created to study the state's water supply and wastewater infrastructure needs.

(b)  The committee consists of 10 members, of whom:

(1)  five shall be appointed by the speaker of the house of representatives from the members of the house of representatives; and

(2)  five shall be appointed by the lieutenant governor from the members of the senate.

(c)  The lieutenant governor and the speaker of the house of representatives each shall appoint a presiding officer from among the members appointed to the committee.

(d)  The committee shall convene at the call of the two presiding officers.

SECTION 8.02.  DUTIES AND POWERS. (a)  The committee is specifically charged to review:

(1)  Texas' current inventory of water resources, including water supply and wastewater treatment infrastructure;

(2)  projections for Texas' future water and wastewater needs to the year 2050;

(3)  the role of the state and regional and local entities in participation and investment in water-related projects; and

(4)  the implementation of Senate Bill No. 1, Acts of the 75th Legislature, Regular Session, 1997.

(b)  In addition, the committee shall develop recommendations to:

(1)  assist Texas communities having limited financial capabilities with their water supply and wastewater infrastructure needs;

(2)  ensure efficient allocation of state and local resources through the use of regional water facilities and management, including water market transactions; and

(3)  help local governments to meet the financial costs created by federal and state water quality regulations.

(c)  The committee may travel around the state and hold hearings or public meetings as needed to fulfill its duties under this article.

(d)  The Senate Committee on Natural Resources and the House Committee on Natural Resources shall provide staff to the committee.

SECTION 8.03.  EXPENSES. The committee shall submit a proposed budget to the appropriate committee on administration in each house. The administrative committees shall jointly approve the committee budget in an amount appropriate for the committee to accomplish its duties under this article.

SECTION 8.04.  REPORT. Not later than January 5, 1999, the committee shall report to the governor, the lieutenant governor, the speaker of the house of representatives, and members of the 76th Legislature the committee's findings and recommendations for necessary legislation.

ARTICLE 9. REPEALER; EFFECTIVE DATE; SAVING; EMERGENCY

SECTION 9.01.  Section 11.028, Water Code, is repealed.

SECTION 9.02.  (a)  Except as provided by Subsections (b) through (f) of this section, this Act takes effect September 1, 1997.

(b)  This section and Sections 2.03, 2.09, 2.10, 2.18, and 3.03 of this Act take effect immediately.

(c)  Section 4.40 of this Act takes effect on the first day of the first calendar quarter beginning on or after the date that it may take effect under Section 39, Article III, Texas Constitution.

(d)  The change in law made by Section 4.40 of this Act to Section 151.318, Tax Code, does not affect taxes imposed before the effective date of Section 4.40 of this Act, and the law in effect before the effective date of that section is continued in effect for purposes of liability for and collection of those taxes.

(e)  Sections 5.03 and 5.05 through 5.08 of this Act take effect on the date on which the constitutional amendment proposed by S.J.R. No. 17, 75th Legislature, Regular Session, 1997, takes effect. If that amendment is not approved by the voters, those sections have no effect.

(f)  Section 5.11 of this Act takes effect on the date on which the constitutional amendment proposed by S.J.R. No. 45, 75th Legislature, Regular Session, 1997, takes effect. If that amendment is not approved by the voters, that section has no effect.

(g)  The change in law made by Section 5.11 of this Act to Subchapter B, Chapter 11, Tax Code, does not affect taxes imposed before the effective date of Section 5.11 of this Act, and the law in effect before the effective date of that section is continued in effect for purposes of liability for and collection of those taxes.

SECTION 9.03.  Section 11.0842, Water Code, as added by this Act, and the changes to Sections 11.082 and 12.052, Water Code, made by this Act are not applicable to any violation relating to the construction of a dam or reservoir for domestic and livestock purposes initiated before March 2, 1997, if a registration for authorization is submitted to the Texas Natural Resource Conservation Commission not later than September 1, 1999, unless modifications other than repairs are made to the dam or reservoir on or after March 2, 1997. On registration of the location, approximate size, and date of completion of the dam or reservoir, the commission shall issue a permit for the dam or reservoir relating back to the date of completion of construction. The date of completion of construction may be established by the submission of competent evidence.

SECTION 9.04.  (a)  The requirement of Section 341.035, Health and Safety Code, as amended by Section 6.20 of this Act, that certain persons must provide the executive director of the Texas Natural Resource Conservation Commission with a business plan, applies only to the prospective owner or operator of a public drinking water supply system for which construction begins on or after September 1, 1997.

(b)  Section 341.0355, Health and Safety Code, as added by Section 6.20 of this Act, applies to the owner or operator of a public drinking water supply system regardless of the date construction of the system began.

SECTION 9.05.  (a)  A change in law made by this Act that applies to a criminal, civil, or administrative penalty applies only to an offense committed or a violation that occurs on or after the effective date of this Act. For the purposes of this Act, an offense is committed or a violation occurs before the effective date of this Act if any element of the offense or violation occurs before that date.

(b)  An offense committed or violation that occurs before the effective date of this Act is covered by the law in effect when the offense was committed or the violation occurred, and the former law is continued in effect for this purpose.

SECTION 9.06.  An Act creating a groundwater conservation district that requires a confirmation election enacted by the 71st, 72nd, 73rd, or 74th Legislature is repealed, effective on the second anniversary of the effective date of this Act, unless the district has been approved at a confirmation election before the second anniversary of the effective date of this Act.

SECTION 9.07.  The importance of this legislation and the crowded condition of the calendars in both houses create an emergency and an imperative public necessity that the constitutional rule requiring bills to be read on three several days in each house be suspended, and this rule is hereby suspended, and that this Act take effect and be in force according to its terms, and it is so enacted.

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President of the Senate Speaker of the House

I hereby certify that S.B. No. 1 passed the Senate on April 3, 1997, by the following vote: Yeas 31, Nays 0; May 24, 1997, Senate refused to concur in House amendments and requested appointment of Conference Committee; May 26, 1997, House granted request of the Senate; June 1, 1997, Senate adopted Conference Committee Report by the following vote: Yeas 31, Nays 0.

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Secretary of the Senate

I hereby certify that S.B. No. 1 passed the House, with amendments, on May 23, 1997, by a non-record vote; May 26, 1997, House granted request of the Senate for appointment of Conference Committee; June 1, 1997, House adopted Conference Committee Report by the following vote: Yeas 140, Nays 4, one present not voting.

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Chief Clerk of the House

Approved:

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Date

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Governor