37-106.01. Power to contract for central Arizona project water for use on state lands; payment of costs; selling unallocated water; disposition of revenue from sale of central Arizona project water and water rights

A. The state land department, with the approval of the governor, may make contracts for and on behalf of the state with the United States or a multi-county water conservation district, organized under title 48, chapter 22, or both, for the purchase and delivery of water from the central Arizona project for use for municipal and industrial purposes on state lands within such district and to agree to pay therefor an amount equal to that paid by other municipal and industrial users under the project for comparable quantities.

B. The quantity of water for which the department is authorized to contract shall not exceed one hundred thousand acre-feet per annum diverted from the aqueduct system between the Colorado river and the Salt river, and one hundred thousand acre-feet per annum diverted from the system south of the Salt river.

C. All or any part of the rights to water acquired by the department under any such contract may be sold, assigned and transferred to any lessee or purchaser of any of the state lands on which such water has been or is to be used or to any provider of permanent municipal water service to those lands. The department shall not make the purchase or use of central Arizona project water by the lessee a condition to renewal of a lease of state land or by the purchaser or lessee in a sale or new lease where mining of groundwater from state lands will not be involved. The transferee of any rights to water under this subsection must have or obtain before the transfer a contract with either or both the United States or a multi-county water conservation district for service of central Arizona project water for municipal and industrial use. The transferee shall reimburse the department, on a pro rata basis, for all costs and charges, including capital costs and administrative expenses, incurred by the department, as of the time of transfer, under its contract for the purchase and delivery of central Arizona project water under subsection A of this section.

D. The cost of central Arizona project water shall be paid from revenues derived from the transfer of water rights acquired by the department under its contract and from revenues from the sale of central Arizona project municipal and industrial water or, in the event such revenues are not sufficient, such cost shall be a charge against the state, providing such contract does not violate article IX, section 5, Constitution of Arizona. Nothing in this section shall be construed as creating a lien upon state lands or against the interest of the state therein or as creating an obligation of the state to pay any charges, costs, assessments or debts other than those described in this section.

E. Before the selection board allocates central Arizona project water to specific state trust lands the department, with the board's approval, may enter into interim contracts to sell unallocated central Arizona project water for municipal and industrial uses on state or any other land subject to a determination by a multi-county water conservation district that the proposed action complies with the terms of the applicable subcontract and the central Arizona project master repayment contract and subject to approval of the director of the department of water resources. Purchasers of water under this subsection shall reimburse the department, on a pro rata basis, for all costs and charges, including capital costs and administrative expenses, incurred by the department under its contract for the purchase and delivery of central Arizona project water under subsection A of this section.

F. The department, with the approval of the state selection board, may enter into contracts to undertake or authorize the storage of central Arizona project water for which the department has signed a municipal and industrial water service subcontract, but that the department has not otherwise allocated for use. A person with whom the department contracts shall pay to a multi-county water conservation district all applicable operation, maintenance and replacement charges established under the provisions of title 48, chapter 22 and associated with any water stored, but shall not be responsible for capital costs paid by the department pursuant to its contracts with the multi-county water conservation district. Each contract between the department and another person for water storage shall specify that the water storage permit holder for the stored water shall assign to the department a share of any long-term storage credits accrued pursuant to the permit and that the department's share of the long-term storage credits shall be negotiated based on the proportion of the costs incurred by the department in the water storage. The department may sell long-term storage credits for the benefit of the state trust land at the appraised fair market value of the credits. In undertaking water storage pursuant to this subsection, the department and the persons with whom it contracts shall comply with all of the provisions of title 45, chapter 3.1. For the purposes of this subsection, " water storage" , " long-term storage credit" and " water storage permit" have the same meanings prescribed in section 45-802.01.

G. The department shall deposit, pursuant to sections 35-146 and 35-147, revenues from the transfer of water rights under subsection C of this section and from the sale of water under subsection E of this section, except for monies attributable to reimbursement of administrative expenses, in the central Arizona project municipal and industrial repayment fund established by section 37-526. Monies attributable to reimbursement of administrative expenses, under both subsections C and E of this section, shall be deposited in the state general fund pursuant to sections 35-146 and 35-147.