By: Estes S.B. No. 1588

A BILL TO BE ENTITLED

AN ACT

relating to the management of the water resources of the state.

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

SECTION 1. The heading to Chapter 1502, Government Code, is amended to read as follows:

CHAPTER 1502. PUBLIC SECURITIES FOR MUNICIPAL UTILITIES, PARKS,

[OR] POOLS, OR WATER CONSERVATION INFRASTRUCTURE

SECTION 2. Section 1502.001, Government Code, is amended by adding Subdivision (4) to read as follows:

(4) "Water conservation infrastructure" means property, interests in property, buildings, structures, activities, services, operations, or other facilities owned by a municipality or any person contracting with a municipality that is found by the governing body of the municipality to conserve, preserve, or treat water, wastewater, stormwater, or other water resources of the municipality.

SECTION 3. The heading to Section 1502.002, Government Code, is amended to read as follows:

Sec. 1502.002. GENERAL AUTHORITY FOR UTILITY SYSTEMS, PARKS, [AND] POOLS, AND WATER CONSERVATION INFRASTRUCTURE.

SECTION 4. Section 1502.002(a), Government Code, is amended to read as follows:

(a) A municipality may acquire, purchase, construct, improve, enlarge, equip, operate, or maintain any property, including channels or bodies of water known as resacas, interests in property, buildings, structures, activities, services, operations, or other facilities, with respect to:

(1) a utility system;

(2) a park; [or]

(3) a swimming pool; or

(4) water conservation infrastructure.

SECTION 5. Subchapter A, Chapter 1502, Government Code, is amended by adding Sections 1502.005 and 1502.006 to read as follows:

Sec. 1502.005. DECLARATION OF PUBLIC PURPOSE. Under Section 52-a, Article III, Texas Constitution, a municipality may undertake to provide or provide funding for water conservation infrastructure in accordance with this chapter that the municipality determines to be:

(1) in furtherance of the development and diversification of the economy of the municipality;

(2) in furtherance of the conservation, preservation, or treatment of water resources of the municipality; and

(3) beneficial to the operation of its utility system.

Sec. 1502.006. ADDITIONAL POWERS RELATED TO PROVISION OF WATER CONSERVATION INFRASTRUCTURE. A municipality may exercise any power granted to the municipality by Chapter 380, Local Government Code, in providing or providing funding for water conservation infrastructure under this chapter.

SECTION 6. The heading to Subchapter B, Chapter 1502, Government Code, is amended to read as follows:

SUBCHAPTER B. PUBLIC SECURITIES FOR UTILITY SYSTEMS, PARKS, [OR]

POOLS, OR WATER CONSERVATION INFRASTRUCTURE

SECTION 7. Section 1502.051(a), Government Code, is amended to read as follows:

(a) The governing body of a municipality may provide funds to acquire, purchase, construct, improve, renovate, enlarge, or equip property, buildings, structures, facilities, or related infrastructure for:

(1) a utility system;

(2) a park; [or]

(3) a swimming pool; or

(4) water conservation infrastructure.

SECTION 8. Section 1502.052(a), Government Code, is amended to read as follows:

(a) The governing body of a municipality may pledge to the payment of any public securities issued or any obligations incurred under Section 1502.051(c) all or any part of the revenue of:

(1) a utility system;

(2) a park; [or]

(3) a swimming pool; or

(4) water conservation infrastructure.

SECTION 9. Section 1502.053, Government Code, is amended to read as follows:

Sec. 1502.053. GRANT OF FRANCHISE. As additional security for public securities issued or obligations incurred under this chapter, the municipality by the terms of the encumbrance may grant a purchaser under sale or foreclosure a franchise to operate the encumbered utility system, park, [or] pool, or water conservation infrastructure for a term not to exceed 20 years from the date of purchase, subject to all laws regulating the operation of the utility system, park, [or] pool, or water conservation infrastructure in force at the time of the sale or foreclosure.

SECTION 10. Section 1502.054(a), Government Code, is amended to read as follows:

(a) A public security issued or an obligation incurred under this chapter:

(1) is not a debt of the municipality;

(2) may be a charge only on the encumbered utility system, park, [or] pool, or water conservation infrastructure; and

(3) may not be included in determining the municipality's power to issue public securities for any purpose authorized by law.

SECTION 11. Section 1502.055(a), Government Code, is amended to read as follows:

(a) Unless authorized by a majority vote of the qualified voters of the municipality, a municipality may not sell a utility system, park, [or] pool, or municipally owned water conservation infrastructure.

SECTION 12. Section 1502.056(a), Government Code, is amended to read as follows:

(a) If the revenue of a utility system, park, [or] swimming pool, or water conservation infrastructure secures the payment of public securities issued or obligations incurred under this chapter, each expense of operation and maintenance, including all salaries, labor, materials, interest, repairs and extensions necessary to provide efficient service, and each proper item of expense, is a first lien against that revenue. For a municipality with a population of more than one million but less than two million, the first lien against the revenue of a municipally owned utility system that secures the payment of public securities issued or obligations incurred under this chapter also applies to funding, as a necessary operations expense, for a bill payment assistance program for utility system customers who:

(1) have been threatened with disconnection from service for nonpayment of bills and who have been determined by the municipality to be low-income customers; or

(2) are military veterans who have significantly decreased abilities to regulate their bodies' core temperatures because of severe burns received in combat.

SECTION 13. Sections 1502.058(a) and (c), Government Code, are amended to read as follows:

(a) Except as provided by Subsection (b) or (c), by Section 1502.059, or by Section 271.052, Local Government Code, a municipality may not use the revenue of a utility system, park, [or] swimming pool, or water conservation infrastructure to pay any other debt, expense, or obligation of the municipality until the debt secured by the revenue is finally paid.

(c) This section does not apply to a payment made from surplus revenue of a utility system, park, [or] swimming pool, or water conservation infrastructure, as provided by the proceedings authorizing the issuance of public securities under this chapter.

SECTION 14. Section 1502.060(a), Government Code, is amended to read as follows:

(a) To the extent provided by the proceedings authorizing the issuance of the public securities issued under this chapter, a municipality may:

(1) use proceeds from the sale of public securities issued to provide funds for a utility system under this chapter for any purpose authorized by Section 1502.051(a)(1) or (b);

(2) use proceeds from the sale of public securities issued to provide funds for a park under this chapter for any purpose authorized by Section 1502.051(a)(2); [or]

(3) use proceeds from the sale of public securities to provide funds for a swimming pool under this chapter for any purpose authorized by Section 1502.051(a)(3); or

(4) use proceeds from the sale of public securities issued to provide funds for water conservation infrastructure under this chapter for any purpose authorized by Section 1502.006 or 1502.051(a)(4).

SECTION 15. Section 1502.066, Government Code, is amended to read as follows:

Sec. 1502.066. RECORDS. The mayor of the municipality shall establish and maintain a complete system of records for a utility system, park, [or] swimming pool, or water conservation infrastructure the revenue of which is encumbered under this chapter that:

(1) shows any free service provided and the value of the free service; and

(2) shows separately the amounts spent and the amounts set aside for operation, salaries, labor, materials, repairs, maintenance, depreciation, replacements, extensions, interest, and the creation of a sinking fund to pay the public securities and debt.

SECTION 16. Section 1502.068, Government Code, is amended to read as follows:

Sec. 1502.068. ANNUAL REPORT. (a) Annually, on the date determined by the governing body of the municipality, the superintendent or manager of a utility system, park, [or] pool, or water conservation infrastructure or another person designated by the governing body shall file with the mayor and governing body of the municipality a detailed report of the operation of the system, park, [or] pool, or water conservation infrastructure for the preceding 12-month period specified by the governing body.

(b) The report must show the total amount of money collected and the balance due, and the total disbursements made and the amounts remaining unpaid, resulting from the operation of the utility system, park, [or] pool, or water conservation infrastructure during that year.

(c) If the municipality provides loans or grants of public money to persons to acquire, purchase, construct, improve, renovate, enlarge, or equip water conservation infrastructure, the report must contain:

(1) the types of water conservation infrastructure projects funded;

(2) the controls imposed by the municipality on the persons receiving loans or grants to ensure that the public purposes described by Section 1502.005 are being carried out; and

(3) an analysis of the results of how the funded water conservation infrastructure projects achieved the intended results in furtherance of the public purposes described by Section 1502.005.

SECTION 17. Section 1502.069(a), Government Code, is amended to read as follows:

(a) A mayor commits an offense if the mayor fails to:

(1) establish the system of records required by Section 1502.066 before the 91st day after the date the utility system, park, [or] pool, or water conservation infrastructure is completed; or

(2) maintain the system of records required by Section 1502.066.

SECTION 18. Section 1502.074, Government Code, is amended to read as follows:

Sec. 1502.074. CIVIL ENFORCEMENT. A person who resides in a municipality and is a taxpayer or holder of a public security issued or an obligation incurred under this chapter and secured by the revenue of the municipality's utility system, park, [or] swimming pool, or water conservation infrastructure as provided by this chapter is entitled to enforce this chapter by appropriate civil action in a district court in the county in which the municipality is located.

SECTION 19. Section 341.039, Health and Safety Code, is amended by adding Subsection (a-1) and amending Subsection (c) to read as follows:

(a-1) The standards adopted by the commission under Subsection (a)(2) must permit the use of graywater for toilet and urinal flushing.

(c) The commission may not require a permit for the domestic use of less than 400 gallons of graywater each day if the graywater:

(1) originates from a private residence;

(2) is used by the occupants of that residence for gardening, composting, [or] landscaping, or toilet or urinal flushing at the residence;

(3) is collected using a system that overflows into a sewage collection or on-site wastewater treatment and disposal system;

(4) is stored in tanks that:

(A) are clearly labeled as nonpotable water;

(B) restrict access, especially to children; and

(C) eliminate habitat for mosquitoes and other vectors;

(5) uses piping clearly identified as a nonpotable water conduit, including identification through the use of purple pipe, purple tape, or similar markings;

(6) is generated without the formation of ponds or pools of graywater;

(7) does not create runoff across the property lines or onto any paved surface; and

(8) is distributed by a surface or subsurface system that does not spray into the air.

SECTION 20. Section 11.085(v), Water Code, is amended to read as follows:

(v) The provisions of this section, except Subsection (a), do not apply to:

(1) a proposed transfer which in combination with any existing transfers totals less than 3,000 acre-feet of water per annum from the same permit, certified filing, or certificate of adjudication;

(2) a request for an emergency transfer of water;

(3) a proposed transfer from a basin to its adjoining coastal basin;

(4) a proposed transfer from the part of the geographic area of a county or municipality, or the part of the retail service area of a retail public utility as defined by Section 13.002, that is within the basin of origin for use in that part of the geographic area of the county or municipality, or that contiguous part of the retail service area of the utility, not within the basin of origin; [or]

(5) a proposed transfer of water that is:

(A) imported from a source located wholly outside the boundaries of this state, except water that is imported from a source located in the United Mexican States;

(B) for use in this state; and

(C) transported by using the bed and banks of any flowing natural stream located in this state; or

(6) a proposed transfer from a basin to another basin identified as a water management strategy or an alternate water management strategy in the state water plan.

SECTION 21. Subchapter E, Chapter 13, Water Code, is amended by adding Section 13.1461 to read as follows:

Sec. 13.1461. CORRECTIONAL FACILITY COMPLIANCE WITH CONSERVATION MEASURES. A retail public utility may require the operator of a correctional facility, as defined by Section 1.07(14), Penal Code, that receives retail water or sewer utility service from the retail public utility to comply with water conservation measures adopted or implemented by the retail public utility.

SECTION 22. Subchapter J, Chapter 15, Water Code, is amended by adding Section 15.6042 to read as follows:

Sec. 15.6042. CROSS-COLLATERALIZATION OF FUNDS. (a) In this section, "state revolving fund bonds" means revenue bonds issued by the board to provide funds for the revolving fund, the safe drinking water revolving fund, or an additional state revolving fund.

(b) Notwithstanding any other law to the contrary, the board by resolution may approve the use of assets of the revolving fund, the safe drinking water revolving fund, or an additional state revolving fund as a source of revenue or security, or both revenue and security, for the payment of the principal of and interest on state revolving fund bonds.

SECTION 23. Section 26.0311, Water Code, is amended by adding Subsection (b-1) to read as follows:

(b-1) The standards adopted by the commission under Subsection (b)(2) must permit the use of graywater for toilet and urinal flushing.

SECTION 24. Subchapter B, Chapter 27, Water Code, is amended by adding Section 27.026 to read as follows:

Sec. 27.026. DUAL AUTHORIZATION OF INJECTION WELLS TO INJECT NONHAZARDOUS BRINE FROM DESALINATION OPERATIONS OR NONHAZARDOUS DRINKING WATER TREATMENT RESIDUALS. (a) The commission may authorize by individual permit, by general permit, or by rule a Class V injection well for the injection of nonhazardous brine from a desalination operation or nonhazardous drinking water treatment residuals into a Class II injection well that is also permitted by the railroad commission under Subchapter C.

(b) The commission and railroad commission by rule shall enter or amend a memorandum of understanding to implement and administer this section.

SECTION 25. Section 36.001, Water Code, is amended by amending Subdivisions (8) and (16) and adding Subdivision (31) to read as follows:

(8) "Waste" means any one or more of the following:

(A) withdrawal of groundwater from a groundwater reservoir at a rate and in an amount that causes or threatens to cause intrusion into the reservoir of water unsuitable for agricultural, gardening, domestic, or stock raising purposes;

(B) the flowing or producing of wells from a groundwater reservoir if the water produced is not used for a beneficial purpose;

(C) escape of groundwater from a groundwater reservoir to any other reservoir or geologic strata that does not contain groundwater;

(D) pollution or harmful alteration of groundwater in a groundwater reservoir by saltwater or by other deleterious matter admitted from another stratum or from the surface of the ground;

(E) willfully [wilfully] or negligently causing, suffering, or allowing groundwater to escape into any river, creek, natural watercourse, depression, lake, reservoir, drain, sewer, street, highway, road, or road ditch, or onto any land other than that of the owner of the well unless such discharge is authorized by permit, rule, or order issued by the commission under Chapter 26;

(F) groundwater pumped for irrigation that escapes as irrigation tailwater onto land other than that of the owner of the well unless permission has been granted by the occupant of the land receiving the discharge; or

(G) for water produced from an artesian well, "waste" also has the meaning assigned by Section 11.205.

(16) "Loan fund" means the groundwater conservation district loan assistance fund created under Section 36.371.

(31) "Operating permit" as used in this chapter means any type of permit issued by a district that relates to the operation of or production from a water well, which may include authorization to drill or complete a water well if the district does not require a separate permit for drilling or completing a water well.

SECTION 26. Section 36.017(i), Water Code, is amended to read as follows:

(i) If a majority of the votes cast at the election are against the levy of a maintenance tax, the district shall set [production] fees authorized by this chapter to pay for the district's regulation of groundwater in the district[, including fees based on the amount of water to be withdrawn from a well].

SECTION 27. Section 36.0171(h), Water Code, is amended to read as follows:

(h) If the majority of the votes cast at the election are against the levy of a maintenance tax, the district shall set [production] fees authorized by this chapter in accordance with Section 35.013(g-1) to pay for the district's regulation of groundwater in the district[, including fees based on the amount of water to be withdrawn from a well].

SECTION 28. Section 36.058, Water Code, is amended to read as follows:

Sec. 36.058. CONFLICTS OF INTEREST. A director of a district is subject to the provisions of Chapters [Chapter] 171 and 176, Local Government Code, relating to the regulation of conflicts of officers of local governments.

SECTION 29. Section 36.061(a), Water Code, is amended to read as follows:

(a) Subject to the law governing the district, the board shall adopt the following in writing:

(1) a code of ethics for district directors, officers, employees, and persons who are engaged in handling investments for the district;

(2) a policy relating to travel expenditures;

(3) a policy relating to district investments that ensures that:

(A) purchases and sales of investments are initiated by authorized individuals, conform to investment objectives and regulations, and are properly documented and approved; and

(B) periodic review is made of district investments to evaluate investment performance and security;

(4) policies and procedures for selection, monitoring, or review and evaluation of professional services; and

(5) policies that ensure a better use of management information, including:

(A) budgets for use in planning and controlling cost; and

(B) an audit or finance committee of the board.[; and

[(C) uniform reporting requirements that use "Audits of State and Local Governmental Units" as a guide on audit working papers and that uses "Governmental Accounting and Financial Reporting Standards."]

SECTION 30. Section 36.116(c), Water Code, is amended to read as follows:

(c) In regulating the production of groundwater based on tract size or acreage, a district may consider the service needs or service area of a retail public [water] utility. For the purposes of this subsection, "retail public [water] utility" shall have the meaning provided by [at] Section 13.002.

SECTION 31. Sections 36.117(a) and (d), Water Code, are amended to read as follows:

(a) A district by rule may provide an exemption from the district's requirement to obtain [a drilling permit, an operating permit, or] any [other] permit required by this chapter or the district's rules.

(d) A district may cancel a previously granted exemption[,] and may require an operating permit for or restrict production from a well and assess any appropriate fees[,] if:

(1) [the well is located in the Hill Country Priority Groundwater Management Area and] the groundwater withdrawals that were exempted under Subsection (b)(1) are no longer used solely for domestic use or to provide water for livestock or poultry;

(2) the groundwater withdrawals that were exempted under Subsection (b)(2) are no longer used solely to supply water for a rig that is actively engaged in drilling or exploration operations for an oil or gas well permitted by the Railroad Commission of Texas; or

(3) the groundwater withdrawals that were exempted under Subsection (b)(3) are no longer necessary for mining activities or are greater than the amount necessary for mining activities specified in the permit issued by the Railroad Commission of Texas under Chapter 134, Natural Resources Code.

SECTION 32. Section 36.122(e), Water Code, is amended to read as follows:

(e) The district may impose an export [a reasonable] fee or surcharge [for an export fee] using one of the following methods:

(1) a fee negotiated between the district and the exporter [transporter];

(2) a rate not to exceed the equivalent of the district's tax rate per hundred dollars of valuation for each thousand gallons of water exported from [transferred out of] the district or 2.5 cents per thousand gallons of water, if the district assesses a tax rate of less than 2.5 cents per hundred dollars of valuation; or

(3) for a fee-based district, a 50 percent [export] surcharge, in addition to the district's production fee, for water exported from [transferred out of] the district.

SECTION 33. Sections 36.153(a), (b), and (d), Water Code, are amended to read as follows:

(a) Annually and subject to Subsection (c), the board shall have an audit made of the financial condition of the district. The district audit shall be performed according to the generally accepted government auditing standards adopted by the American Institute of Certified Public Accountants.

(b) Financial statements shall be prepared in accordance with generally accepted accounting principles as adopted by the American Institute of Certified Public Accountants. The annual audit and other district records must be open to inspection during regular business hours at the principal office of the district.

(d) A financially dormant district may elect not to conduct an audit and instead submit to the executive director a financial dormancy affidavit [instead of complying with the audit requirements of Section 49.191].

SECTION 34. Section 36.157(a), Water Code, is amended to read as follows:

(a) A district, or the county or counties where the district is to be located, may pay all costs and expenses necessarily incurred in the creation and organization of a district, including legal fees and other incidental expenses, and may reimburse any person, including a county, for money advanced for these purposes.

SECTION 35. Section 36.159, Water Code, is amended to read as follows:

Sec. 36.159. GROUNDWATER CONSERVATION DISTRICT MANAGEMENT PLAN FUNDS. The Texas Water Development Board may allocate funds from the water assistance fund to a district to:

(1) conduct initial data collections under this chapter;

(2) [, to] develop and implement a long-term management plan under Section 36.1071;[,] and

(3) [to] participate in regional water plans.

SECTION 36. Section 36.204, Water Code, is amended by adding Subsection (c) to read as follows:

(c) Sections 26.04(c)-(j), 26.05(b), (c), (d), (e), and (g), and 26.07, Tax Code, do not apply to a tax levied and collected under this chapter or an ad valorem tax levied and collected for the payment of the interest on and principal of bonds issued by a district.

SECTION 37. Sections 36.205(f) and (g), Water Code, are amended to read as follows:

(f) A district, including a district described under Subsection (d), may assess a production fee under Subsection (c) and an export fee under Subsection (g), if applicable, for any water produced under an exemption under Section 36.117 if that water is subsequently sold to another person.

(g) A district may assess an export [a transportation] fee under Section 36.122.

SECTION 38. Section 36.206(a), Water Code, is amended to read as follows:

(a) A temporary board may set [user] fees authorized by this chapter to pay for the creation and initial operation of a district, until such time as the district creation has been confirmed and a permanent board has been elected by a majority vote of the qualified voters voting in the district in an election called for those purposes.

SECTION 39. Section 36.207, Water Code, is amended to read as follows:

Sec. 36.207. USE OF [PERMIT] FEES [AUTHORIZED BY SPECIAL LAW]. A district may use funds obtained from administrative, production, or export [permit] fees collected under a [pursuant to the] special law governing the district or this chapter for any purpose consistent with the district's approved 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 40. Section 36.251, Water Code, is amended to read as follows:

Sec. 36.251. SUIT AGAINST DISTRICT. (a) A person, firm, corporation, or association of persons affected by and dissatisfied with any [provision or with any] rule or order made by a district, including an appeal of a decision on a permit application, is entitled to file a suit against the district or its directors to challenge the validity of the law, rule, or order.

(b) Only the district, the applicant, and parties to a contested case hearing may participate in an appeal of a decision on the application that was the subject of that contested case hearing. An appeal of a decision on a permit application must include the applicant as a necessary party.

(c) The suit shall be filed in a court of competent jurisdiction in any county in which the district or any part of the district is located. The suit may only be filed after all administrative appeals to the district are final.

SECTION 41. Section 36.3011, Water Code, is amended to read as follows:

Sec. 36.3011. COMMISSION INQUIRY AND ACTION REGARDING DISTRICT DUTIES. (a) In this section, "affected person" means, with respect to a management area:

(1) an owner of land in the management area;

(2) a groundwater conservation district or subsidence district in or adjacent to the management area;

(3) a regional water planning group with a water management strategy in the management area;

(4) a person who holds or is applying for a permit from a district in the management area;

(5) a person with a legally defined interest in groundwater in the management area; or

(6) any other person defined as affected by commission rule.

(b) An affected person may file a petition with the commission requesting an inquiry for any of the following reasons:

(1) a district fails to submit its management plan to the executive administrator;

(2) a district fails to participate in the joint planning process under Section 36.108;

(3) a district fails to adopt rules;

(4) a district fails to adopt the applicable desired future conditions adopted by the management area at a joint meeting;

(5) a district fails to update its management plan before the second anniversary of the adoption of desired future conditions by the management area;

(6) a district fails to update its rules to implement the applicable desired future conditions before the first anniversary of the date it updated its management plan with the adopted desired future conditions;

(7) the rules adopted by a district are not designed to achieve the adopted desired future conditions;

(8) the groundwater in the management area is not adequately protected by the rules adopted by a district; or

(9) the groundwater in the management area is not adequately protected due to the failure of a district to enforce substantial compliance with its rules.

(c) Not later than the 90th day after the date the petition is filed, the commission shall review the petition and either:

(1) dismiss the petition if the commission finds that the evidence is not adequate to show that any of the conditions alleged in the petition exist; or

(2) select a review panel as provided in Subsection (d).

(d) If the petition is not dismissed under Subsection (c), the commission shall appoint a review panel consisting of a chairperson and four other members. A director or general manager of a district located outside the management area that is the subject of the petition may be appointed to the review panel. The commission may not appoint more than two members of the review panel from any one district. The commission also shall appoint a disinterested person to serve as a nonvoting recording secretary for the review panel. The recording secretary may be an employee of the commission. The recording secretary shall record and document the proceedings of the panel.

(e) Not later than the 120th day after appointment, the review panel shall review the petition and any evidence relevant to the petition and, in a public meeting, consider and adopt a report to be submitted to the commission. The commission may direct the review panel to conduct public hearings at a location in the management area to take evidence on the petition. The review panel may attempt to negotiate a settlement or resolve the dispute by any lawful means.

(f) In its report, the review panel shall include:

(1) a summary of all evidence taken in any hearing on the petition;

(2) a list of findings and recommended actions appropriate for the commission to take and the reasons it finds those actions appropriate; and

(3) any other information the panel considers appropriate.

(g) The review panel shall submit its report to the commission.

(h) Not later than the 45th day after receiving the review panel's report under this section [Section 36.1082], the executive director or the commission shall take action to implement any or all of the panel's recommendations. The commission may take any action against a district it considers necessary in accordance with Section 36.303 if the commission finds that:

(1) the district has failed to submit its management plan to the executive administrator;

(2) the district has failed to participate in the joint planning process under Section 36.108;

(3) the district has failed to adopt rules;

(4) the district has failed to adopt the applicable desired future conditions adopted by the management area at a joint meeting;

(5) the district has failed to update its management plan before the second anniversary of the adoption of desired future conditions by the management area;

(6) the district has failed to update its rules to implement the applicable desired future conditions before the first anniversary of the date it updated its management plan with the adopted desired future conditions;

(7) the rules adopted by the district are not designed to achieve the desired future conditions adopted by the management area during the joint planning process;

(8) the groundwater in the management area is not adequately protected by the rules adopted by the district; or

(9) the groundwater in the management area is not adequately protected because of the district's failure to enforce substantial compliance with its rules.

SECTION 42. Section 36.303(a), Water Code, is amended to read as follows:

(a) If Section [36.108,] 36.301, 36.3011, or 36.302(f) applies, the commission, after notice and hearing in accordance with Chapter 2001, Government Code, shall take action the commission considers appropriate, including:

(1) issuing an order requiring the district to take certain actions or to refrain from taking certain actions;

(2) dissolving the board in accordance with Sections 36.305 and 36.307 and calling an election for the purpose of electing a new board;

(3) requesting the attorney general to bring suit for the appointment of a receiver to collect the assets and carry on the business of the groundwater conservation district; or

(4) dissolving the district in accordance with Sections 36.304, 36.305, and 36.308.

SECTION 43. Section 36.321, Water Code, is amended to read as follows:

Sec. 36.321. ADDING LAND BY PETITION OF LANDOWNER. Subject to Section 36.331, the [The] owner of land not already in [contiguous to] a district may file with the board a notarized petition requesting that the owner's land be included in the district. 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 44. Section 36.325, Water Code, is amended to read as follows:

Sec. 36.325. ADDING CERTAIN TERRITORY BY PETITION. (a) Landowners of a defined area of territory not already in a district may file with any district a petition requesting inclusion in that district and, subject to Section 36.331, the defined area of territory is not required to be contiguous with that district.

(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 area or includes the entire county.

(c) 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 45. Section 36.328(a), Water Code, is amended to read as follows:

(a) Annexation of the territory by petition filed under Section 36.325 is not final until ratified by a majority vote of the voters in the territory to be added. An election in the existing district accepting the addition of land is not required.

SECTION 46. The heading to Subchapter L, Chapter 36, Water Code, is amended to read as follows:

SUBCHAPTER L. GROUNDWATER CONSERVATION DISTRICT LOAN ASSISTANCE

FUND

SECTION 47. Section 36.371, Water Code, is amended to read as follows:

Sec. 36.371. GROUNDWATER CONSERVATION DISTRICT LOAN ASSISTANCE FUND. (a) The groundwater conservation district loan assistance fund is created, to be funded by direct appropriation and by the Texas Water Development Board from the water assistance fund.

(b) Repayments of loans shall be deposited in the water assistance fund.

SECTION 48. Section 36.403, Water Code, is amended to read as follows:

Sec. 36.403. SCHEDULING OF PUBLIC HEARING. (a) The general manager or board may schedule a public hearing on permit or permit amendment applications received by the district as necessary, as provided by Section 36.114.

(b) The general manager or board may schedule more than one application for consideration at a public hearing.

(c) A public hearing must be held at the district office or regular meeting location of the board unless the board provides for hearings to be held at a different location.

(d) A public hearing may be held in conjunction with a regularly scheduled board meeting.

SECTION 49. Sections 36.404(a) and (d), Water Code, are amended to read as follows:

(a) If the general manager or board schedules a public hearing on an application for a permit or permit amendment, the general manager or board shall give notice of the hearing as provided by this section.

(d) A person may request notice from the district of a public hearing on a permit or a permit amendment application. The request must be in writing and is effective for the remainder of the calendar year in which the request is received by the district. To receive notice of a public hearing in a later year, a person must submit a new request. An affidavit of an officer or employee of the district establishing attempted service by first class mail, facsimile, or e-mail to the person in accordance with the information provided by the person is proof that notice was provided by the district.

SECTION 50. Section 36.405, Water Code, is amended to read as follows:

Sec. 36.405. HEARING REGISTRATION. The district may require each person who participates in a public hearing to submit a hearing registration form stating:

(1) the person's name;

(2) the person's address; and

(3) whom the person represents, if the person is not there in the person's individual capacity.

SECTION 51. Subchapter M, Chapter 36, Water Code, is amended by adding Section 36.4051 to read as follows:

Sec. 36.4051. BOARD ACTION; CONTESTED CASE HEARING REQUESTS; PRELIMINARY HEARING. (a) The board may take action on any uncontested application at a properly noticed public meeting held at any time after the public hearing at which the application is scheduled to be heard. The board may issue a written order to:

(1) grant the application;

(2) grant the application with special conditions; or

(3) deny the application.

(b) The board shall schedule a preliminary hearing to hear a request for a contested case hearing filed in accordance with rules adopted under Section 36.415. The preliminary hearing may be conducted by:

(1) a quorum of the board;

(2) an individual to whom the board has delegated in writing the responsibility to preside as a hearing examiner over the hearing or matters related to the hearing; or

(3) the State Office of Administrative Hearings under Section 36.416.

(c) Following a preliminary hearing, the board shall determine whether any person requesting the contested case hearing has standing to make that request and whether a justiciable issue related to the application has been raised. If the board determines that no person who requested a contested case hearing had standing or that no justiciable issues were raised, the board may take any action authorized under Subsection (a).

(d) An applicant may, not later than the 20th day after the date the board issues an order granting the application, demand a contested case hearing if the order:

(1) includes special conditions that were not part of the application as finally submitted; or

(2) grants a maximum amount of groundwater production that is less than the amount requested in the application.

SECTION 52. Section 36.406(d), Water Code, is amended to read as follows:

(d) The presiding officer may:

(1) convene the hearing at the time and place specified in the notice;

(2) set any necessary additional hearing dates;

(3) designate the parties regarding a contested application;

(4) establish the order for presentation of evidence;

(5) administer oaths to all persons presenting testimony;

(6) examine persons presenting testimony;

(7) ensure that information and testimony are introduced as conveniently and expeditiously as possible without prejudicing the rights of any party;

(8) prescribe reasonable time limits for testimony and the presentation of evidence; [and]

(9) exercise the procedural rules adopted under Section 36.415; and

(10) determine how to apportion among the parties the costs related to:

(A) a contract for the services of a presiding officer; and

(B) the preparation of the official hearing record.

SECTION 53. Section 36.410, Water Code, is amended to read as follows:

Sec. 36.410. PROPOSAL FOR DECISION [REPORT]. (a) Except as provided by Subsection (e), the presiding officer shall submit a proposal for decision [report] to the board not later than the 30th day after the date the evidentiary [a] hearing is concluded.

(b) The proposal for decision [report] must include:

(1) a summary of the subject matter of the hearing;

(2) a summary of the evidence or public comments received; and

(3) the presiding officer's recommendations for board action on the subject matter of the hearing.

(c) The presiding officer or general manager shall provide a copy of the proposal for decision [report] to:

(1) the applicant; and

(2) each [person who provided comments or each] designated party.

(d) A party [person who receives a copy of the report under Subsection (c)] may submit to the board written exceptions to the proposal for decision [report].

(e) If the hearing was conducted by a quorum of the board and if the presiding officer prepared a record of the hearing as provided by Section 36.408(a), the presiding officer shall determine whether to prepare and submit a proposal for decision [report] to the board under this section.

(f) The board shall consider the proposal for decision at a final hearing. Additional evidence may not be presented during a final hearing. The parties may present oral argument at a final hearing to summarize the evidence, present legal argument, or argue an exception to the proposal for decision. A final hearing may be continued as provided by Section 36.409.

SECTION 54. Sections 36.412(a), (b), and (c), Water Code, are amended to read as follows:

(a) An applicant in a contested or uncontested hearing on an application or a party to a contested hearing may administratively appeal a decision of the board on a permit or permit amendment application by requesting written findings and conclusions [or a rehearing before the board] not later than the 20th day after the date of the board's decision.

(b) On receipt of a timely written request, the board shall make written findings and conclusions regarding a decision of the board on a permit or permit amendment application. The board shall provide certified copies of the findings and conclusions to the person who requested them, and to each [person who provided comments or each] designated party, not later than the 35th day after the date the board receives the request. A party to a contested hearing [person who receives a certified copy of the findings and conclusions from the board] may request a rehearing [before the board] not later than the 20th day after the date the board issues the findings and conclusions.

(c) A request for rehearing must be filed in the district office and must state the grounds for the request. If the original hearing was a contested hearing, the party [person] requesting a rehearing must provide copies of the request to all parties to the hearing.

SECTION 55. Section 36.415(b), Water Code, is amended to read as follows:

(b) In adopting the rules, a district shall:

(1) define under what circumstances an application is considered contested; [and]

(2) limit participation in a hearing on a contested application to persons who have a personal justiciable interest related to a legal right, duty, privilege, power, or economic interest that is within a district's regulatory authority and affected by a permit or permit amendment application, not including persons who have an interest common to members of the public; and

(3) establish the deadline for a person who may participate under Subdivision (2) to file in the manner required by the district a protest and request for a contested case hearing.

SECTION 56. Section 36.416, Water Code, is amended by adding Subsections (d), (e), and (f) to read as follows:

(d) An administrative law judge who conducts a contested case hearing shall consider applicable district rules or policies in conducting the hearing, but the district deciding the case may not supervise the administrative law judge.

(e) A district shall provide the administrative law judge with a written statement of applicable rules or policies.

(f) A district may not attempt to influence the finding of facts or the administrative law judge's application of the law in a contested case except by proper evidence and legal argument.

SECTION 57. Section 36.4165, Water Code, is amended to read as follows:

Sec. 36.4165. FINAL DECISION; CONTESTED CASE HEARINGS. (a)

In a proceeding for a permit application or amendment in which a district has contracted with the State Office of Administrative Hearings for a contested case hearing, the board has the authority to make a final decision on consideration of a proposal for decision issued by an administrative law judge [consistent with Section 2001.058, Government Code].

(b) A board may change a finding of fact or conclusion of law made by the administrative law judge, or may vacate or modify an order issued by the administrative judge, only if the board determines:

(1) that the administrative law judge did not properly apply or interpret applicable law, district rules, written policies provided under Section 36.416(e), or prior administrative decisions;

(2) that a prior administrative decision on which the administrative law judge relied is incorrect or should be changed; or

(3) that a technical error in a finding of fact should be changed.

SECTION 58. Section 36.1082, Water Code, is repealed.

SECTION 59. The Texas Water Development Board shall conduct a study to define the quality and quantity of groundwater in this state in confined and unconfined aquifers. In conducting the study, the board shall produce a map that shows the area and water quality of confined and unconfined groundwater aquifers.

SECTION 60. Not later than December 31, 2016, the Texas Water Development Board shall report the results of the study conducted under this Act to the lieutenant governor, the speaker of the house of representatives, and the standing committees in the senate and the house of representatives that have jurisdiction over natural resources.

SECTION 61. The Texas Commission on Environmental Quality shall adopt the standards required by Section 341.039, Health and Safety Code, as amended by this Act, and Section 26.0311, Water Code, as amended by this Act, not later than January 1, 2016.

SECTION 62. This Act applies only to an application for a water right or an amendment to a permit, certified filing, or certificate of adjudication authorizing an interbasin transfer of water that is accepted for filing on or after the effective date of this Act. An application for a water right or an amendment to a permit, certified filing, or certificate of adjudication authorizing an interbasin transfer of water that is accepted for filing before the effective date of this Act is governed by the law in effect at the time the application is accepted for filing, and the former law is continued in effect for that purpose.

SECTION 63. The changes in law made by this Act apply only to an application for a permit or a permit amendment that is received by a groundwater conservation district on or after the effective date of this Act. An application for a permit or permit amendment that is received before the effective date of this Act is governed by the law in effect on the date the application is received, and that law is continued in effect for that purpose.

SECTION 64. This Act takes effect September 1, 2015.