SRC-AAA, HRD, MAX, JRN, JFA, CDH, TNM, MAM, SLL S.B. 1 75(R)    BILL
ANALYSIS 


Senate Research CenterS.B. 1
By: Brown
Natural Resources
1-21-97
As Filed


DIGEST 

Currently, water, more than any other natural resource, challenges Texas'
future. Scarcity and competition for water, heightened environmental
concerns, and the costliness of new water supply development make sound
water management increasingly difficult to achieve; however, with Texas'
population projected to double in the next 50 years and the water needs of
its cities and industries increasing correspondingly, additional water
development becomes essential. 

This bill addresses Texas water policy in six general areas:  drought
response management; water management, marketing, and transfers; surface
water and groundwater supplies; financial assistance to local governments;
small communities assistance, and water data collection and dissemination. 

Article 1 - Drought Response Management

Designates the Texas Water Development Board (TWDB) as the lead state
drought response planning agency and creates the drought planning and
monitoring committee.  Allows TWDB to financially assist local governments
in the development of drought response plans. 

Authorizes the Texas Natural Resource Conservation Commission (TNRCC) to
assess certain penalties for violations of surface water rights, dam
safety, and levee construction provisions.  

Allows the executive director of TNRCC to issue emergency permits or
temporarily suspend or amend permit conditions without notice or hearing
to address emergency drought conditions for not more than 120 days.   

Consolidates all TNRCC emergency order and permitting provisions for
water, and allows TNRCC to authorize emergency rate increases for a
utility in emergency drought conditions. 

Allows the executive director of TNRCC or a watermaster to mandate without
notice or hearing, for not more than 120 days, and only in emergency
drought conditions, the transfer of surface water from a permittee holding
a permit for other than domestic or municipal use to a city or utility for
domestic or municipal use.   

Article 2 - Water Management, Marketing, and Transfers

Requires a TNRCC permit to convey developed groundwater in a state
watercourse or stream, and requires water discharged in such a manner to
meet quality standards while causing no adverse environmental impacts.   

Allows TNRCC to issue a consolidated permit for water quality and bed and
banks conveyance, and includes provisions for return of surplus water as
conditions for granting a water right.  Specifies that once surface water
has been diverted under a water right and returned to a water course or
stream, it is considered surplus water and subject to other appropriation. 

Confirms the continued authority of TNRCC to issue multipurpose surface
water rights. 

Lessens liability concerns of water sellers regarding intended temporary
water sales. 

Removes the limit (50 percent of a water right) on deposits in the State
Water Bank. 
 
Maintains notification and hearing requirements in the cancellation of a
water right. 

Outlines the criteria to be used in determining whether an application for
an interbasin transfer should be granted and specifies the administrative
aspects of a surface water rights application for an interbasin transfer.

Directs TNRCC to develop a regulatory process to evaluate transfers and
consider ways of mitigating significant adverse impacts of transfers. 

Article 3 - Surface Water and Groundwater Supplies

Authorizes the executive administrator of TWDB, TNRCC, and political
subdivisions to prepare regional water management plans, and allows TWDB
to provide financial assistance to local governments in the development of
those plans.   

Provides that all surface water right holders having an annual
appropriation of 200 acre-feet/year or more, or who have been found in
violation of rules prohibiting the waste of water, must implement a water
conservation plan.   

Allows TWDB to make loans for improving water efficiency use in irrigation
systems and promoting dryland farming. 

Expands the current sales tax exemption for the purchase of pollution
control equipment to include water conservation and reuse equipment. 

Allows for locations in Texas where aquifer storage and recovery projects
proved feasible to petition and acquire permanent permits from TNRCC prior
to June 1, 1999. 

Streamlines the Priority Groundwater Management Areas process by removing
statutory requirements that delay or discourage the creation of districts. 

Requires completion of TWDB and TNRCC Priority Groundwater Management Area
studies by a certain date and mandates TNRCC to report biannually to the
legislature on their findings.  

Establishes that groundwater conservation districts are the state's
preferred governmental entity for the management of groundwater resources
in Texas; strengthens the districts' authority; and aids districts through
TWDB loans and technical assistance. 

Provides accountability for the groundwater management system by setting
statutory criteria and timelines for management plan development;
requiring TNRCC approval of the plans; authorizing TNRCC to dissolve
inactive districts; and requiring legislative audit review of operational
districts.  
Article 4 - Financial Assistance to Local Governments

Pursuant to the passage of a constitutional amendment, provides for the
consolidation of existing voter-approved bond authorizations, including
water quality, water supply, flood control, and state participation, to
fully maximize funds available to local governments in developing water
projects.  
Creates the Texas Water Development Fund II in the state treasury and
stipulates that all water financial assistance bond proceeds be deposited
into this fund.   

Authorizes TWDB to enter into bond enhancement agreements with commercial
bands in order to mitigate the risk of failure to recover the debt service
cost of bond funds until the funds can be loaned. 

Article 5 - Small Communities Assistance

Authorizes TWDB to administer the Safe Drinking Water Revolving Fund and
provide low-interest loans to small communities. 
 
Provides TNRCC rate-setting flexibility for small public water systems.

Allows TNRCC to facilitate the merging of non-viable systems; to order
other retail utilities; and to avoid future problems through a stronger
impetus toward regionalization and increased financial and planning
requirements. 
 
Article 6 - Water Data Collection and Dissemination

Improves coordination and reduces duplication between agencies using the
Texas Natural Resources Information System (TNRIS) and merges the TNRIS
Task Force and the GIS Planning Council into a single entity, the Texas
Geographical Information Council. 

PURPOSE

As proposed, S.B. 1 sets forth provisions and provides penalties for
misuse of the development and management of the water resources of the
state.   

RULEMAKING AUTHORITY

Rulemaking authority is granted to the Texas Natural Resource Conservation
Commission in SECTION 1.02 (Section 11.272, Water Code), SECTION 1.07
(Section 16.238(a), Water Code), SECTION 3.37 (Section 36.0161(b)(2),
Water Code), and to the Texas Water Development Board in SECTION 3.11
(Section 15.406(f), Water Code), SECTION 3.12 (Section 15.407, Water
Code), SECTION 3.13 (Section 16.059(d), Water Code), SECTION 3.53
(Sections 36.372(b) and 36.374,Water Code), SECTION 4.03 (Sections 17.952,
17.956, 17.960(b) and (c), and 17.967(a), Water Code), SECTION 4.06
(Section 17.011(c), Water Code), SECTION 5.16 (Section 15.6041(d), Water
Code) and to any district or authority 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, in SECTION 3.47 (Section 36.122, Water Code) of this
bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.01. Amends Chapter 16C, Water Code, by adding Section 16.060, as
follows: 

Sec. 16.060.  STATE DROUGHT PLANNING.  Requires the executive
administrator of the  Texas Water Development Board (TWDB) to oversee the
development and implementation of a comprehensive state drought plan.
Provides that TWDB is the state agency primarily responsible for ongoing
drought and water supply monitoring, technical, and financial assistance
for drought planning, and administrative support of committee functions.
Authorizes TWDB to provide cost-sharing financial assistance from the
research and planning fund to assist local governments in developing
regional and local drought response plans.  Creates and sets forth the
composition and responsibilities of the drought planning and monitoring
committee (committee). Sets forth the factors that the committee is
required to consider when determining whether a drought exists for
purposes of this section.  

SECTION 1.02.  Amends Chapter 11D, Water Code, by amending Section 11.1271
and adding Section 11.1272, as follows: 

Sec.  11.1271.  ADDITIONAL REQUIREMENTS: WATER CONSERVATION PLANS.
Authorizes the Texas Natural Resource Conservation Commission (TNRCC) to
require the holder of an existing permit, certified filing, or certificate
of adjudication for the appropriation of surface water in the amount of
200 acre-feet a year or more to develop and implement a water conservation
plan that adopts reasonable water conservation measures, as defined by
Section 11.002(8)(B), of this code. 

Sec.  11.1272.  ADDITIONAL REQUIREMENTS: DROUGHT CONTINGENCY PLANS FOR
CERTAIN APPLICANTS AND WATER RIGHT HOLDERS.  Requires TNRCC, by rule, to
require wholesale and retail public water suppliers to develop drought
contingency  plans during periods of water shortages caused by drought. 

 
SECTION 1.03. Amends Chapter 11C, Water Code, by adding Sections
11.0841-11.0843, as follows: 

Sec.  11.0841.  PRIVATE CIVIL REMEDY.  Provides that this chapter does not
affect any right of any private corporation or individual available at
common law.  

Sec.  11.0842.  ADMINISTRATIVE PENALTY.  Sets forth the guidelines and
determination of sanctions TNRCC is authorized to impose for violations of
this chapter, or rules or orders adopted under this chapter, or water
rights issued under this chapter.  Provides that all proceedings under
this subsection are subject to Section 2001, Government Code.  Sets forth
the required actions regarding payments received from a person who has
been charged with violation of this chapter.  Sets forth the guidelines
for appeal from the imposition of such penalties.  Sets forth the legal
consequences for noncompliance with TNRCC-imposed penalties.   

Sec.  11.0843.  FIELD CITATION.  Sets forth the guidelines authorizing the
executive director of TNRCC (executive director) or a watermaster to issue
field citations for violations of this chapter, or rules or orders adopted
under this chapter, or water rights issued under this chapter.  Sets forth
where penalties collected under this section are required to be deposited. 

SECTION 1.04. Amends Section 11.139, Water Code, as follows:

Sec.  11.139. New heading: EMERGENCY AUTHORIZATIONS.  Sets forth
procedures by which TNRCC  and the executive director are authorized to
grant an emergency permit, order, or amendment to an existing water right.
Authorizes TNRCC to grant emergency authorizations for the temporary
transfer and use of all or part of a surface water right for other than
domestic or municipal use to a retain or wholesale water supplier for
domestic or municipal use.  Provides that the person granted an
authorization under Subsection (h) of this section is liable to the owner
from whom the use is transferred for the fair market value of the water
transferred as well as for any damages proximately caused by the transfer
of use. Provides that an emergency authorization does not vest in the
grantee any right to the diversion, impoundment, or use of water and shall
expire and be cancelled in accordance with its terms. 

SECTION 1.05. Amends Section 12.052(c), Water Code, to provide that an
owner of a dam who willfully fails or refuses to follow an order of TNRCC
relating to  the construction, reconstruction, repair, or removal of the
dam is liable for up to $25,000, rather than $1,000, a day for each day of
the violation.  Makes a conforming change.     

SECTION 1.06.   Amends Chapter 12C, Water Code, by adding Sections 12.053
and 12.054, as follows: 

Sec.  12.053.  ADMINISTRATIVE PENALTY.  Sets forth the guidelines
authorizing TNRCC to impose administrative penalties for violations of
rules or orders adopted under Section 12.052, Water Code, regarding dam
safety.  Provides that all proceedings under this subsection are subject
to Section 2001, Government Code.  Sets forth the required actions
regarding payments received from a person who has been charged with
violation of Section 12.052.  Sets forth the guidelines for appeal from
the imposition of such penalties.  Sets forth the legal consequences for
noncompliance with TNRCC-imposed penalties.  

Sec.  12.054.  PRIVATE CIVIL REMEDY.  Provides that nothing in this
chapter affects the right of any private corporation or individual to
pursue a common-law remedy. 

SECTION 1.07.   Amends Chapter 16G, Water Code, by adding Sections
16.237-16.239, as follows: 

Sec. 16.237.  ADMINISTRATIVE PENALTY. Sets forth procedures by which TNRCC
may  assess an administrative penalty against a person who violates a
commission rule or order adopted under Section 16.236 of this code. 

Sec. 16.238.  LEVEE SAFETY.    Requires TNRCC to make and enforce rules
and orders and perform all other acts necessary to provide for the safe
construction, maintenance, repair, and removal of levees located in this
state.  Requires rules and orders of TNRCC to be adopted or issued only
after proper notice and hearing as provided in the rules of TNRCC. Sets
forth penalties to be assessed for wilful failure or refusal to comply
with the rules and orders promulgated under Subsection (a) of this
section.  Sets for guidelines for TNRCC to issue an emergency order,
either mandatory or prohibitory in nature, directing the owner of a levee
to repair, modify, maintain, dewater, or remove a levee which is unsafe.
Provides that nothing in this section or in rules or orders adopted by the
commission shall be construed to relieve an owner or operator of a levee
of the legal duties, obligations, or liabilities incident to ownership or
operation. 

Sec.  16.239.  PRIVATE CIVIL REMEDY.    Provides that nothing in this
chapter affects the right of any private corporation or individual to
pursue a common-law remedy. 

ARTICLE 2. WATER MANAGEMENT, MARKETING AND TRANSFERS

SECTION 2.01.   Amends Section 791.026, Government Code, to provide that
contracts may require the purchaser to develop replacement supplies prior
to the expiration of the contract. Provides that where a contract sets
expiration provisions, no continuation of service is implied. Makes
conforming changes. 

SECTION 2.02.   Amends Section 11.002, Water Code,  to define "developed
water" and "surplus water." 

SECTION 2.03.   Amends Section 11.023(e), Water Code, to provide that
TNRCC  may authorize an appropriation of a single amount or volume of
water for more than one purpose.  Prohibits water actually diverted for
all purposes from exceeding total water appropriated, if a single amount
of water is appropriated for more than one purpose of use. 

SECTION 2.04.   Amends Section 11.036, Water Code, to provide that if a
contract sets expiration provisions, no continuation of service is
implied. Authorizes the terms of a contract  to provide that the person
using stored or conserved water is required to develop alternative or
replacement supplies prior to the expiration of the contract and may
enforce such terms by court order.  Makes a conforming changes. 

SECTION 2.05.   Amends Section 11.041(a), Water Code, to authorize a
person entitled to use water from certain areas to show TNRCC that the
person is willing to comply with all reasonable contractual provisions.
Makes conforming changes. 

SECTION 2.06.   Amends Section 11.042, Water Code, to require a person who
wishes to convey developed water in a watercourse or stream to obtain
prior approval.  Requires developed water discharged into a watercourse or
stream to meet applicable water quality standards.  Requires a person who
has discharged groundwater into a watercourse or stream and who
subsequently wished to divert and use such water must first obtain
authorization for diversion and use from TNRCC subject to special
conditions as necessary to protect existing water rights, instream uses,
and freshwater inflows to bays and estuaries. 

SECTION 2.07.   Amends Section 11.046, Water Code, to authorize TNRCC to
include conditions in the water right providing for the the return of
surplus water and return point, in granting an application for a water
right.  Authorizes water appropriated under a water right to be
beneficially used and reused by a water right holder.  Provides that water
diverted under a water right and returned to a watercourse and stream is
surplus water and is subject to appropriation. 

SECTION 2.08. Amends Section 11.085, Water Code, as follows:

 Sec.  11.085. New heading: INTERBASIN TRANSFERS.  Requires one public
meeting to be held  in both the basin of origin and the basin receiving
water for the proposed transfer, prior to any action on an application for
an interbasin transfer.  Authorizes any person to present relevant
information at the meeting.  Requires TNRCC to hold an evidentiary
hearing, if the application is contested.  Sets forth persons to receive
notice of an application for an interbasin transfer,  and provides the
manner in which notice is to be given.   Requires the applicant to pay the
cost of notice.  Requires TNRCC to weigh the effects of the proposed
transfer on the basin of origin and the receiving basin by considering
certain factors. Authorizes TNRCC to grant the application, wholly or in
part, only to the extent that the detriments to the basin of origin are
less than the benefits to the receiving basin.  Authorizes TNRCC to grant
new or amended water rights.  Provides that this section does not apply to
transfers of less than 5,000 acre-feet of water per annum from the same
water right, a request for an emergency transfer, or a proposed transfer
from a basin to its adjoining coastal basin. Requires the new or amended
water right authorizing the transfer to contain a condition for a period
not greater than the contract term,  if the transfer is based on a
contractual sale of water.  Authorizes the parties to a contract for an
interbasin transfer to include provisions for compensation and mitigation.
Provides that a person who diverts water in violation of this section is
subject to a fine of not more than $10,000, rather than not less than $100
nor more than $500.  Makes conforming and nonsubstantive changes. 

SECTION 2.09. Amends Section 11.124(a), Water Code,  to make conforming
and nonsubstantive changes. 

SECTION 2.10. Amends Section 11.135(b), Water Code,  to require a permit
to include,  among other information, a special condition limiting the
total amount of water to be diverted for all purposes to the amount of
water appropriated, if the appropriated water is authorized for multiple
purposes. 

SECTION 2.11. Amends Sections 11.176 and 11.177, Water Code, as follows:

Sec.  11.176. HEARING.  Provides that a hearing on the cancellation of a
water right as provided by this chapter is unnecessary if such hearing is
waived by the affected water right holder.  Provides that a water right
for a term does not vest in the water right holder any right to the
diversion, impoundment, or use of water for longer than the term of the
water right and shall expire and be cancelled in accordance with its terms
without further need for notice or hearing.  Makes conforming changes. 

Sec.  11.177.  COMMISSION FINDING; ACTION.  Sets forth the conditions
TNRCC is required to consider in determining what constitutes reasonable
diligence or a justified nonuse.  Makes conforming and nonsubstantive
changes.   

SECTION 2.12. Amends Section 15.704(a), Water Code, to authorize the
deposit of a water right, rather than up to 50 percent of a water right,
in the water bank for an initial term of up to 10 years. 

SECTION 2.13. Provides that all permits approved by TNRCC 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. 

ARTICLE 3.  SURFACE WATER AND GROUNDWATER SUPPLIES

SECTION 3.01. Amends Section 11.134(b), Water Code,  to require TNRCC to
grant an application only if the proposed appropriation addresses a water
supply need in a manner that is consistent with the state water plan or an
approved regional water management plan for the area in which the proposed
appropriation is located, unless TNRCC determines that conditions warrant
waiver of this requirement.  Makes a conforming change. 

SECTION 3.02.   Amends Chapter 11D, Water Code, by adding Section 11.151,
as follows:   

 Sec. 11.151.  EFFECTS OF PERMITS ON GROUNDWATER.  Authorizes TNRCC to
assess the effects on groundwater in considering an application for a
permit to store, take, or divert surface water. 

SECTION 3.03. Amends Section 11.153, Water Code, by amending the section
heading and Subsection (d), as follows: 

Sec. 11.153.  New heading:  PROJECTS FOR STORAGE OF APPROPRIATED WATER IN
AQUIFERS.  Requires TNRCC to issue a final order granting a permit or
amendment to a permit authorizing the storage of appropriated water in
aquifers for subsequent beneficial use only 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). Makes a conforming
change. 

SECTION 3.04. Amends Sections 11.154(a)-(c), and (e), to make conforming
and nonsubstantive changes. 

SECTION 3.05. Amends Section 11.155(b), Water Code, to make conforming
changes. 

SECTION 3.06. Amends Section 11.173(b), Water Code, to make a conforming
change. 

SECTION 3.07. Amends Section 15.001(6), Water Code, to redefine "project."

SECTION 3.08. Amends Section 15.002(b), Water Code, to authorize projects
to be in the state or outside the state.  Requires out-of-state projects
to be funded through a Texas political subdivision and 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 3.09.   Amends Section 15.401, Water Code, to provide that the
research and planning program (program) is created to provide money for
research into the state's water resources for regional planning by
political subdivisions. Authorizes the program to provide money for
research and planning by Texas political subdivisions related to the
proper conservation 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.  Requires priority to be given to research and
planning for projects within the state. 

SECTION 3.10. Amends Section 15.404(a), Water Code, to authorize the TWDB
to enter into a contract with any person 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 3.11.   Amends Section 15.406(f), Water Code, to require the TWDB
to adopt rules establishing criteria of eligibility for regional facility
planning money that considers the degree to which the regional facility
planning by the political subdivision is consistent with an approved
regional water management plan for the area in which the subdivision is
located. 

SECTION 3.12.   Amends Chapter 15F, Water Code, by adding a new Section
15.0407 and renumbering existing Section 15.407 as Section 15.408,  as
follows: 

Sec. 15.407.  REGIONAL WATER MANAGEMENT PLANNING.  Authorizes TWDB to
enter into contracts with political subdivisions to pay from the research
and planning fund all or part of the cost of developing or revising
comprehensive regional water management plans as defined in Section 16.059
of this code.  Requires a political subdivision that desires money from
the research and planning fund for regional management planning to submit
an application to TWDB in the manner and form required by TWDB rules.
Sets forth the required contents of the application.  Authorizes TWDB,
after notice and hearing, to award the applicant all or part of the
requested funds.  Sets forth the required contents of a contract between
TWDB and the political subdivision if TWDB grants application.  Requires
TWDB  to adopt rules establishing criteria for eligibility for regional
water management planning money and sets forth the requirements for the
criteria.  Requires TWDB to require that regional water management plans
developed or revised under contracts entered into under this section be
made available to TNRCC. 

Sec. 15.408.  FACILITY ENGINEERING IN ECONOMICALLY DISTRESSED AREAS.
Created from existing Section 15.407. 

SECTION 3.13.   Amends Chapter 16C, Water Code, by adding Section 16.059,
as follows: 


Sec. 16.059.  REGIONAL WATER MANAGEMENT PLANS.  Requires the executive
administrator of the TWDB (executive administrator) to encourage the
development and periodic revision, as necessary, of  regional water
management plans and authorizes the executive administrator to provide
technical assistance with the development or revision of such plans.
Requires regional water management plans to be prepared by political
subdivisions under this section to assure an adequate, reliable, and
affordable long-term water supply for all of the communities and public
water supply systems within a designated regional water management
planning area.  Requires regional water management plans to be developed
and revised with the substantive participation of all area communities,
public water systems, and water suppliers.  Sets forth requirements for
regional water management plans.  Requires TWDB, in coordination with the
Parks and Wildlife Department and TNRCC, to develop guidance consistent
with the state water plan.  Requires the executive administrator to
designate the areas for which regional water management plans will be
developed, and sets forth what factors the administrator must take into
consideration. Authorizes the executive administrator to designate
political subdivisions within each designated regional water management
planning area to serve as the coordinating body for planning.  Requires
TWDB to adopt rules to provide for the procedures for approval of regional
water management plans and to govern the procedures to be followed by the
executive administrator.  Requires the executive administrator in
formulating the state water plan, to give consideration to and incorporate
as appropriate, regional water management plans approved by TWDB.
Authorizes TWDB to provide financial assistance to political subdivisions
under Chapters 15C-F and J, 16E and F, and 17D, I, K, and L, Water Code,
for water projects only if certain conditions are met, unless TWDB
determines that conditions warrant waiver of this requirement. 

SECTION 3.14.   Amends Section 16.341(3), Water Code, to make a conforming
change. 

SECTION 3.15.   Amends Section 16.343(g), Water Code, to make conforming
changes. 

SECTION 3.16.   Amends Section 16.345(a), Water Code, to make a conforming
change. 

SECTION 3.17.   Amends Sections 16.350(a) and (d), Water Code, to make
conforming changes.  

SECTION 3.18.   Amends Section 17.895, Water Code, by adding Subsection
(c), to authorize TWDB to make conservation loans to borrower districts
for the cost of purchasing and installing devices, on public or private
property, designed to indicate the amount of water withdrawn for
irrigation purposes. 

SECTION 3.19.   Amends Section 17.926, Water Code, to make a conforming
change. 

SECTION 3.20.   Amends Section 27.0511, Water Code, by adding Subsection
(h), to require the Texas Railroad Commission (RCC), upon receipt of an
application for an injection well using fresh water for enhanced recovery
purposes and the well is to be located in a groundwater conservation
district,  to give notice to the district in which the well is to be
located.  Requires RCC to determine whether the permit application is
consistent with the district's management plan. 

SECTION 3.21. Amends Section 35.002(12), Water Code, to define "priority
groundwater management area" rather than "critical area." 

 SECTION 3.22. Amends Section 35.007, Water Code, as follows:

Sec.  35.007. New heading:  IDENTIFYING, DESIGNATING, AND DELINEATING
PRIORITY GROUNDWATER MANAGEMENT AREAS.  Requires the executive director
and the executive administrator to meet at least once a year to identify,
based on the information available to TNRCC and TWDB, those areas of the
state that are experiencing or that are expecting to experience, within
the immediately following 50-year period, critical groundwater problems,
including shortages of surface water.  Requires the executive director to
prepare a report to TNRCC if the executive director concludes that an area
of the state should be considered for designation as a priority
groundwater management area (area). Requires the executive director to
begin preparation of a priority groundwater management area report
(report) by requesting a study from the executive administrator, which
must assess the area's immediate, short-term, and long-term water supply
and needs; and be completed and delivered to the director on or before the
180th day following the date of request.  Requires the executive director
to request a study from the director of the Parks and Wildlife Department
for the purpose of preparing the report required by this section.  Sets
forth the requirements of the study.  Requires the report to include
certain items.  Requires the executive director to complete the  report
and file it with TNRCC on or before the 240th day following the date on
which the executive administrator was requested to produce a study.  Makes
conforming changes. 

SECTION 3.23. Amends Section 35.008, Water Code, as follows:

Sec.  35.008.  New heading:  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.  Requires TNRCC to designate areas using the procedures provided
by this chapter in lieu of those provided by Chapter 2001B, Government
Code.  Requires TNRCC to call an evidentiary hearing (hearing) to consider
the designation and physical dimensions of an area. Requires the hearing
to be held at a location in one of the counties in which the area is
located, or proposed to be located, or in the nearest convenient location
if adequate facilities are not available in those counties.  Requires
TNRCC to hear testimony and receive evidence from all affected persons and
consider the director's report, supporting information, the testimony and
evidence received at the hearing. Authorizes TNRCC to request such
information from any source, if TNRCC considers further information
necessary.  Makes conforming changes. 

SECTION 3.24. Amends Section 35.009, Water Code, to require TNRCC to
publish notice of the hearing in at least one newspaper with general
circulation in the county or counties in which the area being designated a
priority groundwater management area or the area within a priority
groundwater management area being considered for district creation or for
addition to an existing district is located.  Sets forth the provisions of
the notice. Requires TNRCC to give written notice of the date, time,
place, and purpose of the hearing to the governing body of certain
entities which supply public drinking water located either partially or
entirely in the area or proposed area before the 30th day preceding the
date set for the hearing.  Makes conforming and nonsubstantive changes. 

SECTION 3.25. Amends Sections 35.012(b)-(e), Water Code, to authorize the
landowners in the area, following the issuance of a TNRCC order under
Subsection (b), to set forth certain provisions relating to the creation
and maintenance of priority groundwater management areas.  Makes
conforming and nonsubstantive changes. 

SECTION 3.26. Amends Section 35.013, Water Code, as follows: 

Sec.  35.013.  New heading:  ADDING PRIORITY GROUNDWATER MANAGEMENT AREA
TO EXISTING DISTRICT.   Makes conforming changes. 

SECTION 3.27. Amends Sections 35.014(b) and (c), Water Code, to make
conforming changes. 

SECTION 3.28. Amends Section 35.015, Water Code, to delete text
prohibiting a political  subdivision from being eligible to receive any
financial assistance from the state. Makes conforming and nonsubstantive
changes. 

SECTION 3.29. Amends Section 35.016(b), Water Code, to provide that a
district is considered active unless TNRCC has determined under Section
36.302 that the district is not operational, rather than if the district
meets the requirements in Section 36.301(c). 

SECTION 3.30. Amends Section 35.017, Water Code, to make a conforming
change. 

SECTION 3.31. Amends Chapter 35, Water Code, by adding Section 35.018, as
follows: 

Sec.  35.018.  REPORTS.  Requires TNRCC in conjunction with TWDB to
prepare and deliver to the governor, the lieutenant governor, and the
speaker of the house of representatives a comprehensive report concerning
activities during the preceding two years relating to the designation of
areas by TNRCC and the creation and operation of districts under Chapter
36, Water Code,  not later than January 31 of each odd-numbered year. Sets
forth the required contents of the report. 

SECTION 3.32. Amends Section 36.001, Water Code, to define "priority
groundwater management area," "loan fund," and "applicant."  

SECTION 3.33. Amends Section 36.012(c), Water Code, to make a conforming
change. 

SECTION 3.34. Amends Section 36.013(d), Water Code, to make a conforming
change.  

SECTION 3.35. Amends Chapter 36B, Water Code, by adding Section 36.0151,
as follows: 

Sec.  36.0151.  CREATION OF DISTRICT FOR PRIORITY GROUNDWATER MANAGEMENT
AREA.  Requires TNRCC to provide that temporary directors be appointed
under Section 36.016 and that an election be called by the temporary
directors to confirm the creation of the district and to elect permanent
directors, if TNRCC proposes that a district be created under Section
35.012(d).  Requires TNRCC to notify the county commissioners court of
each county with territory in the district of the district's creation as
soon as practicable after issuing the order creating the district. 

SECTION 3.36. Amends Section 36.016, Water Code, to set forth requirements
for the appointment of temporary directors. Makes conforming and
nonsubstantive changes. 

SECTION 3.37. Amends Chapter 36B, Water Code, by adding Section 36.0161,
as follows: 

Sec.  36.0161.  METHOD FOR APPOINTING TEMPORARY DIRECTORS FOR DISTRICT IN
PRIORITY GROUNDWATER MANAGEMENT AREA.  Sets forth the apportionments for
appointment of temporary directors for a district in an area that is
contained within a certain amount of counties.  Defines "estimated
groundwater use." Requires the apportionment of appointments under
Subsection (a) to be made by TNRCC so as to reflect the proportion each
county's estimated groundwater use bears to the sum of the estimated
groundwater use for the district as determined under Subsection (c).
Requires TNRCC, by rule, to determine the method it will use to implement
this subdivision. Requires TNRCC to develop an estimate of annual
groundwater use in acre-feet for each county area within the district if
the district is contained within two, three, or four counties. 

SECTION 3.38. Amends Section 36.102, Water Code, to delete text
authorizing the board of directors of a district to set reasonable civil
penalties for breach of any rule of the district.  Deletes text regarding
a penalty under this section.  Authorizes the district to issue orders in
accordance with Chapter 2001, Government Code, to enforce the terms and
conditions of permits, orders, or rules issued or adopted under this
chapter.  

SECTION 3.39. Amends Chapter 36D, Water Code, by adding Section 36.1021,
as follows: 

 Sec.  36.1021.  ADMINISTRATIVE PENALTY.  Sets forth the procedures for
assessment of an administrative penalty. 

SECTION 3.40. Amends Section 36.104, Water Code, to authorize limitation
of an export of groundwater if there is an existing and foreseeable need
for the water that is identified in the district's management plan and
there is no alternative within the district.  Makes a conforming change. 

SECTION 3.41. Amends Chapter 36D, Water Code, by amending Section 36.107
and adding Sections 36.1071-36.1073 as follows: 

Sec.  36.107.  New heading: RESEARCH.  Makes no change.

Sec.  36.1071.  MANAGEMENT PLAN. Sets forth the procedures for development
of a comprehensive management plan by any district or authority created
under Section 52, Article III, or Section 59, Article XVI, Texas
Constitution, that has the authority to regulate the spacing of water
well, the production from water wells, or both (district) in coordination
with surface water management entities on a regional basis.  Requires the
board of directors of a district (board) to adopt amendments to the
management plan as necessary after notice and hearing.  Requires
amendments to comply with the requirements of this section.  Makes
conforming changes. 

Sec.  36.1072.  COMMISSION REVIEW AND APPROVAL OF MANAGEMENT PLAN. Sets
forth procedures for review and approval of the management plan by TNRCC.
Requires the board to readopt the plan with or without revisions at least
once every five years. Prohibits TNRCC from taking enforcement action
against a district until a certain date. 

Sec.  36.1073.  AMENDMENT TO MANAGEMENT PLAN.  Requires any amendment to
the management plan to be submitted to TNRCC within 60 days following
adoption of the amendment by the board.  Requires TNRCC to review and
approve any amendment which substantially affects the management plan in
accordance with the procedures established under Section 36.1072.   

SECTION 3.42. Amends Section 36.108(a), Water Code, to make a conforming
change. 

SECTION 3.43. Amends Section 36.113, Water Code, to require a district to
require an application for a permit be in writing and a sworn statement
must be signed.  Authorizes the district to set forth the required
contents of the permit application.  Requires the district to make certain
considerations in granting a permit.  Authorizes a district to prohibit
changes in the withdrawal and use of groundwater under a permit from being
made without prior approval of a permit amendment issued by the district.
Makes conforming and nonsubstantive changes. 

SECTION  3.44. Amends Chapter 36D, Water Code, by adding Section 36.1131,
as follows: 

Sec.  36.1131.  REQUIRED ELEMENTS OF PERMIT.  Requires a permit issued by
the district to the applicant under Section 36.113 to state the terms and
provisions prescribed by the district.  Sets forth the authorized contents
of the permit. 

SECTION 3.45. Amends Sections 36.117(a) and (c)-(e), Water Code, to
provide that the injection of gas, saltwater, or other fluid, except fresh
water, under permits issued by the RCC are exempt from this chapter.
Requires permits issued by RCC for an injection well using fresh water for
enhanced recovery purposes to comply with the district's management plan.
Makes conforming and nonsubstantive changes. 

SECTION 3.46. Amends Section 36.121, Water Code, to make a conforming
change. 

SECTION 3.47. Amends Chapter 36D, Water Code, by adding Sections 36.122
and 36.123, as follows: 

Sec.  36.122.  PREFERENCE IN USE OF WATER.  Authorizes a district, by
rule, to  establish and apply a preference-of-use listing for the
district's groundwater, provided that domestic and livestock uses and,
among municipal uses, public health and safety uses receive the highest
priority. 

Sec.  36.123.  TECHNICAL ASSISTANCE.  Authorizes TNRCC to provide
technical assistance to districts during their initial operational phase.
Authorizes such assistance to include, but is not limited to,
demonstrations of how to adopt rules, how to set up permitting programs,
and how to initiate enforcement actions. 

SECTION 3.48. Amends Chapter 36E, Water Code, by adding Sections
36.159-36.161, as follows: 

Sec.  36.159.  MANAGEMENT PLAN FUNDS.  Authorizes TWDB to allocate funds
from the research and planning fund created under Chapter 15F, to a
district to conduct initial data collections under this chapter, to
develop and implement a long-term management plan under Section 36.1071,
and to participate in regional plans that provide for the conjunctive
management of surface water and groundwater. 

Sec.  36.160.  FUNDS.  Sets forth certain activities to which TWDB, TNRCC,
and the Texas Parks and Wildlife Department (TPWD) are authorized to
allocate funds to carry out the objectives of this chapter and Chapter 35. 

Sec.  36.161.  ELIGIBILITY FOR FUNDING.  Sets forth requirements for
eligibility to receive funding and procedures for denying funding to a
district. 

SECTION 3.49. Amends Chapter 36G, Water Code, by adding Section 36.206, as
follows: 

Sec.  36.206.  DISTRICT FEES.  Sets forth procedures for fees to be
charged by the district. 
 
SECTION 3.50. Amends Chapter 36I, Water Code, as follows:

SUBCHAPTER I.  New heading: PERFORMANCE REVIEW AND DISSOLUTION

Sec.  36.301.  FAILURE TO SUBMIT A MANAGEMENT PLAN.  Requires TNRCC to
take appropriate action under Section 36.303, if a board fails to submit a
management plan or to receive approval of its management plan under
Section 36.1072 or fails to submit or receive approval of an amendment to
the management plan under Section 36.1073. 

Sec.  36.302.  DETERMINATION OF WHETHER DISTRICT IS OPERATIONAL. Requires
TNRCC to make a determination of whether a district is actively engaged in
achieving the objectives of the district's management plan based on an
audit of the district's performance under the plan.  Requires TNRCC to
conduct such audits following the second anniversary of the initial
approval of the plan by TNRCC.  Requires TNRCC, by rule, to establish a
schedule for the audit of district under this section.  Requires TNRCC to
take appropriate action under Section 36.303, if TNRCC finds under
Subsection (a) that the district is not operational.   

Sec.  36.303.  ACTION BY COMMISSION.  Authorizes TNRCC, after notice and
hearing, to take any action TNRCC deems appropriate to enforce compliance
with any rule or order of TNRCC or any provisions of this chapter,
including certain actions. 

Sec.  36.304.  New heading: DISSOLUTION OF DISTRICT.  Authorizes TNRCC to
dissolve certain districts.  Makes conforming changes. 

Sec.  36.305.  New heading: NOTICE OF HEARING FOR DISSOLUTION OF BOARD OR
DISTRICT.  Makes conforming changes. 

Sec.  36.306.  INVESTIGATION.  Requires the executive director to
investigate the facts and circumstances of any violations.  Requires the
executive director to prepare and file a written report with TNRCC and the
district and include any actions the executive director  believes TNRCC
should take under Section 36.303. 

Sec.  36.307.  ORDER OF DISSOLUTION OF BOARD.  Sets forth procedures to be
followed if TNRCC enters an order to dissolve the board.  Makes conforming
changes. 

Sec.  36.308.  CERTIFIED COPY OF ORDER.  Created from existing Section
36.305. 

Sec.  36.309.  APPEALS.  Requires appeals from any TNRCC order to be filed
and heard in the district court of Travis County in accordance with
Chapter 2001, Government Code. Deletes a requirement that trial appeal be
de novo and that the substantial evidence rule does not apply. 

Sec.  36.310.  ASSETS ESCHEAT TO STATE.  Requires assets that escheat to
the State of Texas upon dissolution of a district to be administered by
the comptroller, rather than the state treasurer. 

SECTION 3.51. Amends Section 36.325(b), Water Code, to require a petition
for inclusion in a district to be signed by the commissioners court of the
county in which the area is located if the area is identified as a
priority groundwater management area, rather than critical area. 

SECTION 3.52. Amends Section 36.331,  Water Code,  to make a conforming
change. 

SECTION 3.53. Amends Chapter 36, Water Code, by adding Subchapter L, as
follows: 

SUBCHAPTER L.  GROUNDWATER DISTRICT LOAN ASSISTANCE FUND

Sec.  36.371.  GROUNDWATER DISTRICT LOAN ASSISTANCE FUND.  Creates the
groundwater district loan assistance fund, to be funded by direct
appropriation and by TWDB, at its discretion, from the water assistance
fund.  Requires repayments of loans to be deposited in the water
assistance fund. 

Sec.  36.372.  FINANCIAL ASSISTANCE.  Authorizes the loan fund to be used
by TWDB to provide loans to newly confirmed districts to pay for their
creation and initial operations. Requires TWDB to establish rules for the
use and administration of the loan fund. 

Sec. 36.373. APPLICATION FOR ASSISTANCE.  Sets forth information required
to be included in an application to TWDB for financial assistance from the
loan fund.  Prohibits TWDB from accepting a loan application from the loan
fund unless it is submitted in affidavit form by the applicant's board.
Requires TWDB to prescribe the affidavit form in its rules.  Prohibits the
rules from restricting or prohibiting TWDB from requiring additional
factual material from an applicant. 

Sec. 36.374. APPROVAL OF APPLICATION.  Authorizes TWDB, by resolution, to
approve an application if it finds that granting financial assistance to
the applicant will serve the public interest and that the revenue pledged
by the applicant will be sufficient to meet obligations assumed by the
applicant.        

SECTION 3.54.  Amends Section 151.318(g), Tax Code, to provide that each
person engaged in manufacturing, processing, fabricating, or repairing
personal property for sale is entitled to a refund or reduction of tax
imposed by this chapter for the purchase of machinery if the machinery has
certain criteria. 

SECTION 3.55.  (a)  Repealer: Sections 35.010 and 35.011, Water Code
(Consideration of Creation of District or Addition of Land in Critical
Area to Existing District, and Notice of Hearing to Create District or Add
Critical Area to Existing District). 

(b) Repealer: Section 5.02, Chapter 133 (Critical Areas Groundwater
Districts).   

SECTION 3.56.   Defines "district."  Requires 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, to submit a
management plan for approval to TNRCC within two years after the effective
date of this Act. 

SECTION 3.57. Requires 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, to be known and referred to as a priority
groundwater management area on or after the effective date of this Act. 

SECTION 3.58.  Requires TNRCC to make all designations of priority
groundwater management areas for which critical area reports were required
to have been  completed, under Chapter 35, Water Code, 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, not
later than December 31, 1997. 

ARTICLE 4.  FINANCIAL ASSISTANCE TO LOCAL GOVERNMENTS

SECTION 4.01.  Amends Section 15.431, Water Code, by amending Subsection
(d) and adding Subsection (g), to authorize TWDB to use money maintained
as principal in the agricultural trust fund to make conservation loans to
borrower districts and loans to lender districts for the purposes listed
in Section 17.895 of this code.  Provides that loans and conservation
loans are subject to the provisions of Sections 17.896 through 17.903 of
this code.  Requires repayments of principal and interest on loans and
conservation loans made under this subchapter to be deposited in the
agricultural trust fund.  Defines "borrower district," "conservation
loan," "individual borrower," "lender district," and "loan."  Deletes text
prohibiting money in the agricultural trust fund from being spent for any
purpose. 

SECTION 4.02.  Amends Section 16.189, Water Code, to require TWDB to
require payments that will recover over the lease period not less than the
total of all principal and interest requirements to the debt incurred by
the state in leasing a state facility.  Makes conforming changes. 

SECTION 4.03.  Amends Chapter 17, Water Code, by adding Subchapter L, as
follows: 

SUBCHAPTER L. WATER FINANCIAL ASSISTANCE BOND PROGRAM

Sec. 17.951.  Defines "fund" and "resolution."

Sec. 17.952. ISSUANCE OF WATER FINANCIAL ASSISTANCE BONDS.  Authorizes
TWDB by resolution to provide for the issuance of water financial
assistance bonds, which are required to be general obligation bonds of the
state, in an aggregate principal amount not to exceed the principal amount
authorized to be issued by Section 49-d-8, Article III, Texas
Constitution. 

Sec. 17.953. CONDITIONS FOR ISSUANCE OF WATER FINANCIAL ASSISTANCE BONDS.
Sets forth terms by which water financial assistance bonds are issued. 

Sec. 17.954. BOND ENHANCEMENT AGREEMENTS; PAYMENT OF EXPENSES. Sets forth
provisions by which TWDB is authorized to enter into bond enhancement
agreements and pay expenses in connection with the issuance of water
financial assistance bonds and to provide financial assistance to
political subdivisions.  Sets forth items that bond enhancement agreements
are authorized to include. 

Sec. 17.955. PERSONS DESIGNATED TO ACT AS AGENTS OF THE BOARD.  Sets forth
the duties of certain persons authorized to act as agents of TWDB. 

Sec. 17.956. TEXAS WATER DEVELOPMENT FUND II.  Provides that the fund is a
special assistance fund in the state treasury, and all water financial
assistance bond proceeds are required to be deposited in the state
treasury to the credit of the fund.  Sets forth accounts required to be
included in the fund and requires proceeds from the sale of water
financial assistance bonds issued to provide financial assistance to
political subdivisions to be credited to such accounts as provided by the
resolution by TWDB.  Authorizes TWDB to create  additional accounts within
the fund as TWDB determines are necessary or convenient for the
administration of the fund. 

Sec. 17.957. STATE PARTICIPATION ACCOUNT. Defines "state participation
account." Requires transfers to be made from this account as provided by
this subchapter.  Sets forth items included in the state participation
account.  Authorizes moneys on deposit in the state participation account
to be used by TWDB for certain projects in the manner TWDB determines
necessary for the administration of the fund. 

Sec. 17.958. ECONOMICALLY DISTRESSED AREAS PROGRAM ACCOUNT. Defines
"economically distressed areas program account."  Sets forth items
included in the economically distressed areas program account.  Authorizes
moneys on deposit in the economically distressed areas program account to
be used by TWDB for certain purposes. Makes conforming changes. 

Sec. 17.959. FINANCIAL ASSISTANCE ACCOUNT.  Defines "financial assistance
account."  Sets forth items included in the financial assistance account.
Authorizes moneys on deposit in the financial assistance account to be
used by TWDB for certain purposes. Makes conforming changes. 

Sec. 17.960. BOND RESOLUTIONS.  Authorizes TWDB to make additional
covenants with respect to water financial assistance bonds and sets forth
instances for which the covenants may  to provide.  Authorizes TWDB to
invest money in the fund and any account therein in any obligations or
securities as provided by the resolution or by rule adopted by TWDB.
Authorizes TWDB to adopt and execute any other proceedings, agreements, or
instruments necessary in the issuance of water financial assistance bonds,
including bond enhancement agreements. 

Sec. 17.961. TRANSFERS TO REVOLVING FUNDS. Authorizes TWDB to direct the
comptroller to transfer amounts from the financial assistance account to
the state water pollution control revolving fund to provide financial
assistance in order to implement a revolving loan program.  Sets forth
provisions by which TWDB is required to use the state water pollution
control revolving fund.  Requires TWDB to use the additional state
revolving fund in the event amounts are transferred to any additional
state revolving fund. 

Sec. 17.962. STATE APPROVALS.  Prohibits the issuance of water financial
assistance bonds under this subchapter unless approved by the bond review
board.  Provides that the proceedings relating to the water financial
assistance bonds are subject to review and approval by the attorney
general in the same manner as provided by Article 717q, V.T.C.S. Provides
that after approval by the attorney general of the proceedings relating to
the issuance of water financial assistance bonds, registration of the
proceedings by the comptroller, and delivery of the water financial
assistance bonds to the purchasers, water financial assistance bonds are
incontestable and constitute general obligations of the state. 

Sec. 17.963. PAYMENT OF BOARD OBLIGATIONS.  Sets forth terms by which TWDB
is required to cooperate with the comptroller to develop procedures for
the payment of principal and interest on water financial assistance bonds
and any obligation under a bond enhancement agreement. 

Sec. 17.964. ELIGIBLE SECURITY.  Provides that water financial assistance
bonds are eligible to secure deposits of public funds of the state and
political subdivisions of the state. Provides that water financial
assistance bonds are lawful and sufficient security for deposits to the
extent of their face value. 

Sec. 17.965. LEGAL INVESTMENTS.  Sets forth the entities for which water
financial assistance bonds are legal and authorized investments. 

Sec. 17.966. MUTILATED, LOST, OR DESTROYED BONDS.  Authorizes TWDB to
provide for the replacement of mutilated, lost, or destroyed water
financial assistance bonds. 
 
Sec. 17.967. REFUNDING BONDS. Sets forth the terms, by resolution, by
which TWDB is authorized to provide for the issuance of water financial
assistance bonds to refund outstanding bonds. 

Sec. 17.968. SALE OF POLITICAL SUBDIVISION BONDS BY THE BOARD; USE OF
PROCEEDS.  Sets forth the terms under which TWDB is authorized to sell or
dispose of political subdivision bonds purchased with money in the fund
and apply the proceeds of the sale of political subdivision bonds held by
TWDB.  Requires TWDB to sell the political subdivision bonds at the price
and under the terms that it determines to be reasonable.  

Sec. 17.969. TAX EXEMPT BONDS. Provides that water financial assistance
bonds, interest income and any profit made on the sale of water assistance
financial bonds issued under this subchapter are free from taxation and
any assessments by this state and any other political subdivision of this
state.                
  
Sec. 17.970. ENFORCEMENT BY MANDAMUS. Authorizes payment of water
financial assistance bonds and obligations incurred under bond enhancement
agreements and performance of official duties prescribed by Section
49-d-8, Article III, Texas Constitution, to be enforced in a court of
competent jurisdiction by mandamus or other appropriate proceedings. 

Sec. 17.971. SUBCHAPTER CUMULATIVE OF OTHER LAWS.  Provides that this
subchapter is cumulative of other laws on the subject, and TWDB is
authorized to use provisions of other applicable laws in the issuance of
water financial assistance bonds and the execution of bond enhancement
agreements, but this subchapter is wholly sufficient authority for the
issuance of water financial assistance bonds, the execution of bond
enhancement agreements, and the performance of all other acts and
procedures authorized by this subchapter.  Authorizes TWDB to exercise the
authority granted to the governing body of an issuer with regard to the
issuance of obligations under Article 717q, V.T.C.S. Authorizes TWDB to
exercise any powers granted to it under this chapter and Chapter 16,
including Chapters 16D-G, and K, notwithstanding any provision
inconsistent with the provisions of this subchapter. 

SECTION 4.04. Amends Section 17.001(7), Water Code, to redefine "water
supply project." 

SECTION 4.05.   Amends Section 17.001, Water Code, by amending Subdivision
(17) and adding Subdivision (25), to redefine "financial assistance" and
defines "water financial assistance bonds." 

SECTION 4.06.   Amends Section 17.011, Water Code, by adding Subsection
(c), to authorize TWDB, by resolution, to issue water financial assistance
bonds.  Sets forth purposes for the bonds to be issued. 

SECTION 4.07.   Amends Section 17.0111, Water Code, to provide that  no
more than $250,000,000 in principal, rather than 50 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 dedicated to the purposes
provided by Chapter 17K. Makes conforming changes. 

SECTION 4.08.   Amends Section 17.182, Water Code, to require proceeds
from the sale of political subdivision bonds held by TWDB either to be
credited to the account from which financial assistance was made or to be
deposited to the credit of the Texas Water Development Fund II.  Sets
forth requirements for the proceeds. 

SECTION 4.09. Amends Section 17.278, Water Code, to prohibit TWDB, 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 TNRCC,  from delivering funds for the
wastewater treatment plant until after the board reviews the plans and
specifications in coordination with TNRCC and finds that the wastewater
treatment plant is capable of producing effluent that will  meet federal
and Texas-approved water quality standards. 

ARTICLE 5. SMALL COMMUNITIES ASSISTANCE

SECTION 5.01.   Amends Section 5.311, Water Code, to authorize TNRCC to
delegate to an administrative law judge of the State Office of
Administrative Hearings the authority to issue orders related to interim
rates under Chapter 13.  Requires the administrative law judge to report
to TNRCC on a hearing in the manner provided by law, except for a hearing
related to interim rates as provided in Subsection (a).  Makes conforming
changes. 

SECTION 5.02.   Amends Sections 13.002(11), (21), and (24), Water Code, to
redefine "member," "service," and "water supply or sewer service
corporation." 

SECTION 5.03.   Amends Section 13.181, Water Code, to require this
subchapter to apply only to a utility and not to municipalities, counties,
districts, or water supply or sewer service corporations, except as stated
in Section 13.192.  Deletes the requirement that this subchapter apply
only to a utility and not be applied to municipalities, counties,
districts, or water supply or sewer service corporations. 

SECTION 5.04.   Amends Section 13.183, Water Code, by adding Subsection
(c), to authorize the regulatory authority to develop methodologies for
water or wastewater rates using factors other than rate of return and
those specified in Section 13.185, to ensure that retail customers receive
higher quality or more reliable water or sewer service.  Sets forth
requirements for overall revenues determined pursuant to a methodology
developed under this section. 

SECTION 5.05.   Amends Section 13.184(a), Water Code, to prohibit the
regulatory authority from prescribing any rate that yields more than a
fair return, unless the regulatory authority adopts rules to further the
purposes stated in Section 13.183(c).  Makes a conforming change. 

SECTION 5.06.   Amends Section 13.185(a), Water Code, to require
components of invested capital and net income to be determined according
to the rules stated in this section, except as provided in Sections
13.183(c) and 13.184(a).  Makes a conforming change. 

SECTION 5.07.   Amends Chapter 13G, Water Code, by adding Section 13.241,
as follows: 

Sec. 13.241.  GRANTING OR AMENDING CERTIFICATES.  Requires TNRCC to ensure
that the groundwater and surface water resources in Texas are adequately
protected and efficiently used and to consider regionalization or
consolidation of systems when economically feasible or in the public
interest, when determining whether to grant or amend a certificate of
public convenience and necessity (certificate).  Sets forth requirements
for a retail public utility requesting a certificate of public convenience
and necessity. 

SECTION 5.08.   Amends Section 13.246, Water Code, by amending Subsection
(c) and adding Subsections (d) and (e), to include the efforts of the
applicant to extend service to any economically distressed areas to the
criteria for granting or amending a certificate.  Defines "economically
distressed areas."  Authorizes TNRCC to require that an applicant submit a
business plan for providing service for areas currently certificated to
the applicant, and allows TNRCC to include conditions in a certificate.
Authorizes TNRCC to require an applicant to provide financial assurance to
ensure continuous and adequate service. 

SECTION 5.09.   Amends Section 13.253, Water Code, to authorize TNRCC to
order any retail public utility that possesses a certificate to provide
specified improvement in its service defined area; or to order retail
public utilities that hold or are required to hold a certificate to
establish specified facilities for the interconnecting service.  Makes a
conforming change. 

SECTION 5.10.   Amends Section 13.254, Water Code, to set forth the
conditions which authorize TNRCC to revoke or amend any certificate of
public convenience and necessity.  Prohibits a retail public utility from
rendering retail water or sewer service to the public in an area that has
been decertified without proper consent from the retail public utility
previously holding the certificate.  Requires TNRCC to determine the
extent to which any utility facilities currently used for providing
service or utility facilities constructed to serve the area being
decertified will be rendered useless as a result of TNRCC's action.
Requires TNRCC to determine the impact on the retail public utility's
ability to repay any debts owed for facilities or services dedicated to
serve the area being decertified. Requires TNRCC to require the new
utility service provider to compensate the decertified retail public
utility.  Sets forth considerations to be used by TNRCC in determining the
amount of compensation.  Authorizes TNRCC to require payment of the
compensation to a decertified retail public utility in a lump sum or to
allow payment to be made by the newly certificated retail public utility
on a per-customer basis. 

SECTION 5.11.   Amends Section 13.301(a), Water Code, to require a utility
or a water supply or sewer service corporation to notify TNRCC by filing a
written application and to give public notice unless public notice is
waived by the director.  Requires the application to include a business
plan and its requirements of the person acquiring the water or sewer
system for providing continuous and adequate service to any areas
currently certificated.  

SECTION 5.12.   Amends Section 13.302(a), Water Code, to set forth
requirements for an application for a person acquiring controlling
interest in a utility. 

SECTION 5.13.   Amends Section 13.412, Water Code, by adding Subsections
(f) and (g), to authorize a receiver appointed under this section to seek
TNRCC approval to acquire the water or sewer utility facilities and
transfer the certificate of the system in receivership.  Requires
application to be in accordance with Subchapter H.  Sets forth conditions
for abandonment under this section and Section 13.4132 of this code. 

SECTION 5.14.   Amends Sections 13.4132(a) and (c), Water Code, to
authorize TNRCC, after providing to the utility an opportunity to be heard
at a TNRCC meeting as an item on its agenda, to authorize a person to
manage certain facilities.  Provides that a person appointed under this
section has the power and duty to access all system components. 

SECTION 5.15.   Amends Section 15.602, Water Code, to define "community
water system," "disadvantaged community," "nonprofit noncommunity water
system,"  "public water system," "Safe Drinking Water Act," and "safe
drinking water revolving fund," and to redefine "political subdivisions."
Makes conforming changes. 

SECTION 5.16.   Amends Chapter 51J, Water Code, by adding Section 15.6041,
as follows: 

Sec. 15.6041. FINANCIAL ASSISTANCE UNDER THE SAFE DRINKING WATER REVOLVING
FUND.  Requires the safe drinking water revolving fund to be administered
by TWDB.  Requires the fund to be held and administered by TWDB, as
provided by Section 15.603, except that the fund shall be used in
accordance with the Safe Drinking Water Act (SDWA) and shall be used to
provide financial assistance for certain purposes.  Authorizes TWDB to
establish accounts in the fund and sets forth types of accounts.  Sets
forth authorization provisions for financial assistance  from the
disadvantaged community account. Requires TWDB to determine the amount of
a loan which the political subdivision cannot repay.  Requires TWDB to
forgive repayment of that portion of the principal of the loan which it
determines the political subdivision cannot repay.  Prohibits financial
assistance from the disadvantaged community account from exceeding the
allowable percentage of the amount of the capitalization grant received by
the state as stipulated in SDWA.  

SECTION 5.17. Amends Sections 15.603(c) and (g), Water Code, to make
conforming and nonsubstantive changes. 

SECTION 5.18.   Amends Section 341.031, Health and Safety Code, to require
TNRCC, in order to preserve the health, safety, and welfare of the
citizens of the state, to ensure that public drinking water supply systems
provide a continuous, adequate, and safe supply of drinking water, and are
financially stable and technically sound.  Requires TNRCC to encourage and
promote the development and use of regional and area-wide drinking water
supply systems.  Deletes the provision requiring that public drinking
water comply with the standards established by the United States  Public
Health Service.  Makes conforming changes. 

SECTION 5.19.   Amends Section 341.035, Health and Safety Code, to require
a person establishing a drinking water supply system for public use,
unless the person is a political subdivision or has agreed to transfer the
ownership and operation of the water supply system to a political
subdivision, to submit a business plan to TNRCC for review and approval
prior to beginning construction demonstrating the capability of the system
management and ownership. Authorizes TNRCC to require an applicant to
provide financial assurance to ensure a continuous and safe supply of
drinking water.  Sets forth the terms by which completed plans and
specifications are required to be submitted to TNRCC for review and
approval. Deletes the provision requiring TNRCC to approve plans that
conform to the state's water safety laws.  Authorizes the water supply
system to be constructed only after TNRCC's approval is received.  Makes
conforming and nonsubstantive changes. 

SECTION 5.20.   Amends Chapter 341C, Health and Safety Code, by adding
Section 341.0351, as follows: 

Sec. 341.0351.  CONTINUOUS AND SAFE DRINKING WATER SUPPLY REQUIREMENTS.
Provides that the owner or manager of a drinking water supply system may
be required, if the public drinking water supply system has a history of
noncompliance or negligence, to demonstrate that resources are available
to ensure proper future operation of the system.  Authorizes TNRCC to
require both submission of a business plan demonstrating the capability of
the system management and financial assurance in an acceptable form.
Sets forth the terms by which a public water supply system which has been
constructed without approval or which the director of TNRCC deems an
imminent health hazard may be required to temporarily cease operations.
Prohibits operations from resuming until authorized by TNRCC or the
director.  Provides that a public water system ordered to cease operations
is entitled to an expedited hearing before TNRCC on written request. Makes
conforming changes. 

SECTION 5.21.   Amends Sections 341.047(a) and (b), Health and Safety
Code, to delete the provision making a violation under Sections 341.031,
341.032(a) or (b), 341.033(a)-(f),  341.035(a)(d) and (f), and 341.036 an
offense punishable by a fine of not less than $100.  Makes conforming
changes.   

SECTION 5.22.   Amends Section 341.048, Health and Safety Code, to require
a person who causes, suffers, allows, or permits a violation under this
subchapter to be assessed a civil penalty of not less than $50 nor more
than $10,000, rather than $500, for each violation.  Deletes the provision
which establishes the penalties ascribed to subsequent violations.  Makes
conforming changes. 

SECTION 5.23.   Amends Section 341.049(a), Health and Safety Code, to make
a conforming change. 

ARTICLE 6.  WATER DATA COLLECTION AND DISSEMINATION  

SECTION 6.01.   Amends Section 16.012, Water Code, to require the
executive administrator, in cooperation with other entities of the state,
to guide the development of a statewide water resource data collection and
dissemination network.  Requires the staff to facilitate access to basic
data and summary information concerning state water resources and provide
guidance required to access and understand Texas water resource data.
Requires the executive administrator to investigate instream flows
including groundwater resources hydrogically connected to ecologically
sensitive areas; lead a statewide effort, in coordination with federal,
state, and local governments and other interested parties, to develop the
network; make recommendations for optimizing its efficiency and
effectiveness; and make basic data and summary information accessible to
state agencies and other interested persons.  Requires all entities of the
state that collect or use water data to cooperate with TWDB in the
development of the network.  Makes conforming changes. 

SECTION 6.02.  Amends Section 16.021, Water Code, to provide that the
Texas Geographical Information Council (TGIC), rather than the Natural
Resources Information System Task Force, is  created to provide strategic
planning and coordination in the acquisition and use of geographical data
and related technologies in the State of Texas.  Sets forth the method by
which entities will be designated as members of TGIC and select
representatives to serve on TGIC.  Requires the duties of the TGIC to
include providing guidance to the executive administrator in carrying out
duties and to the Department of Information Resources in developing rules.
Deletes the provision regarding the composition of the Natural Resources
Information System Task Force.  Sets forth the terms by which, under the
guidance of TGIC, the executive administrator is required to further
develop the Texas Natural Resources Information System; make
recommendations to the Department of Information Resources; acquire and
disseminate natural resource and related socioeconomic data describing the
Texas-Mexico border region; and develop mutually compatible statewide
digital base maps depicting natural resources and man-made features.
Makes conforming and nonsubstantive changes. 

SECTION 6.03.   Provides that 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
Geographical Information Council.  Requires all designated member agencies
of both predecessor entities to continue to serve as member agencies of
the Texas Geographical Information Council. 

ARTICLE 7.  EFFECTIVE DATE; EMERGENCY

SECTION 7.01.   (a)  Effective date:  September 1, 1997, except as
provided by Subsections (b)-(e) of this section. 

(b)  Provides that this section and Sections 2.03, 2.09, 2.10, and 2.13 of
this Act take effect immediately. 

(c)  Provides that Section 3.54 of this Act takes effect on the first day
of the first calender quarter beginning on or after the date that it may
take effect under Section 39, Article III, Texas Constitution.   

(d)  Establishes that the change in law made by Section 3.54 of this Act
to Section 151.318, Tax Code, does not affect taxes imposed before the
effective date of Section 3.54 of this Act. 

(e)  Provides that Sections 4.03 and 4.05-4.07 of this Act take effect on
the date on which the constitutional amendment proposed by __.J.R. No. __,
75th Legislature, Regular Session, 1997, takes effect.  Provides that if
the amendment is not approved by the voters, those sections have no
effect. 

SECTION 7.02.   Emergency clause.