Section R12-15-723. Extinguishment Credits

A.      Except as provided in subsection (D), the owner of a grandfa- thered right may extinguish the right in exchange for extin- guishment credits by submitting the following:

1.        A notarized statement of extinguishment of a grandfa- thered right on a form provided by the Director;

2.        The grandfathered right number;

3.        If the right being extinguished is a Type 1 non-irrigation grandfathered right or an irrigation grandfathered right, evidence of ownership of the land to which the grandfa- thered right is appurtenant;

4.        If the grandfathered right is located in the Prescott AMA, evidence that all of the following conditions are met:

a.         The land to which the right is appurtenant has not been and will not be subdivided pursuant to a pre- liminary plat or a final plat that was approved by a city, town, or county before August 21, 1998; and

b.        The land to which the right is appurtenant is not and will not be the location of a subdivision for which a complete and correct application for a certificate of assured water supply was submitted to the Director before August 21, 1998;

5.        If the right being extinguished is an irrigation grandfa- thered right, evidence that the development of the land to which the right is appurtenant is not completed; and

6.        Any additional information the Director may reasonably require to process the extinguishment.

B.       The Director shall calculate the amount of extinguishment credits pursuant to R12-15-724(B), R12-15-725(B), R12-15- 726(B) or R12-15-727(B). The Director shall notify the owner of the amount of extinguishment credits in writing. If the owner is extinguishing only a portion of the right, the Director shall issue a new certificate of grandfathered right for the remainder of the right.

C.      A Type 1 non-irrigation grandfathered right or an irrigation grandfathered right may be extinguished in whole or in part. A Type 2 non-irrigation grandfathered right may be extinguished only in whole.

D.      The following rights may not be extinguished in exchange for extinguishment credits:

1.        An irrigation grandfathered right that is appurtenant to land that has been physically developed for a non-irriga- tion use. The Director shall not consider the land to be physically developed until the development is completed.

2.        A Type 1 non-irrigation grandfathered right, if the Direc- tor determines that the holder is likely to continue to receive groundwater from an undesignated municipal provider for the same use pursuant to the provider’s ser- vice area right or pursuant to a groundwater withdrawal permit.

3.        A Type 2 non-irrigation grandfathered right that was issued based on the withdrawal of groundwater for min- eral extraction or processing or for the generation of elec- trical energy.

4.        On or after January 1, 2025, any grandfathered right that is in the Phoenix, Prescott, or Tucson AMAs.

5.        Any grandfathered right in the Pinal AMA beginning in the first calendar year in which the allocation factor for the extinguishment of a grandfathered right is zero, pur- suant to R12-15-725(B)(3) or (4).

6.        A Type 1 non-irrigation grandfathered right that was requested to be included by a city or town in the Tucson AMA in the determination made under A.R.S. § 45- 463(F).

E.       The owner of extinguishment credits may pledge the credits to a certificate or to a designation before the certificate or desig- nation is issued by submitting with the application for the cer- tificate or designation a notice of intent to pledge extinguishment credits on a form provided by the Director. The extinguishment credits shall be pledged to the certificate or designation upon issuance of the certificate or designation.

F.       The owner of extinguishment credits may pledge the credits to a certificate or to a designation after the certificate or designa- tion is issued by submitting a notice of intent to pledge extin- guishment credits on a form provided by the Director. The Director shall notify the owner of the extinguishment credits and the certificate holder or designated provider that the cred- its have been pledged to the certificate or designation.

G.      Extinguishment credits that have not been pledged to a certifi- cate or designation may be conveyed within the same AMA. Extinguishment credits pledged to a certificate or designation shall not be conveyed to another person, except that:

1.        If extinguishment credits are pledged to a certificate that is later assigned or reissued, any unused credits are trans- ferred, by operation of this subsection, to the assigned or reissued certificate. If the certificate is partially assigned or reissued, a pro rata share of the unused extinguishment credits is transferred to each assigned or reissued certifi- cate according to the estimated water demand.

2.        If extinguishment credits are pledged to a certificate for a subdivision that is later served by a designated provider or a municipal provider that is applying for a designation, any unused extinguishment credits may be used to sup-

port the municipal provider’s designation as long as the municipal provider serves the subdivision and remains designated. If the municipal provider is no longer serving the subdivision or if the municipal provider loses its des- ignated status, any unused extinguishment credits shall revert, by operation of this subsection, to the certificate to which they were originally pledged.

H.      The Director shall review a statement of extinguishment of a grandfathered right and a notice of intent to pledge extinguish- ment credits pursuant to the licensing time-frame provisions in R12-15-401.

I.        A person may apply to the Director on or before December 31, 2015 for the restoration of all or a portion of an irrigation grandfathered right extinguished under this Section during cal- endar year 2005, 2006 or 2007 if all of the following condi- tions are met:

1.        The person owns the land to which the right or portion of the right was appurtenant;

2.        The land to which the right or portion of the right was appurtenant is physically capable of being irrigated and the infrastructure for delivering water to the land for irri- gation purposes remains intact and is operable;

3.        The person holds extinguishment credits that were issued for the extinguishment of a grandfathered right in the AMA in which the land is located and that have not been pledged to a certificate or designation under subsection

(E) or (F) in the following amount, as applicable:

a.         If the person seeks to restore the entire irrigation grandfathered right, an amount of extinguishment credits equal to the amount of extinguishment cred- its issued by the Director in exchange for extinguish- ment of the irrigation grandfathered right; or

b.        If the person seeks to restore a portion of the irriga- tion grandfathered right, an amount of extinguish- ment credits equal to the result obtained by multiplying the percentage of the right sought to be restored by the amount of extinguishment credits issued by the Director in exchange for the extin- guishment of the right.

J.        An application to restore all or a portion of an irrigation grand- fathered right under subsection (I) shall be on a form provided by the Director and include all of the following:

1.     A fee of $250.00;

2.        The irrigation grandfathered right number of the right sought to be restored;

3.        If a certificate of extinguishment credits was issued by the Director for the extinguishment credits described in subsection (I)(3), the original certificate or an affidavit stating that the certificate is lost;

4.        A copy of a deed showing that the applicant owns the land to which the right or portion of the right sought to be restored was appurtenant and, if the application seeks to restore only a portion of the right, the legal description of the land to which that portion of the right was appurte- nant;

5.        A certification by the applicant that the conditions described in subsection (I) are met; and

6.        An agreement in writing that if the right or portion of the right is restored, the flexibility account for the land to which the right or portion of the right is appurtenant shall have an account balance of zero at the beginning of the calendar year in which the right or portion of the right is restored and that any credits registered to the flexibility account after the right is restored may not be conveyed or sold to any person, including the applicant.

K.      The Director shall approve an application to restore all or a portion of an irrigation grandfathered right submitted under subsection (I) if the application includes the fee and the infor- mation required under subsection (J) and the Director deter- mines that the information is correct. If the Director approves an application to restore all or a portion of an irrigation grand- fathered right, all of the following apply:

1.        The irrigation water duty for the land to which the right or portion of the right is restored shall be the same as it was when the right was extinguished, unless the irrigation water duty is changed in a management plan adopted after the right was extinguished or is modified pursuant to

A.R.S. § 45-575;

2.        The flexibility account for the land to which the right or portion of the right is appurtenant shall have an account balance of zero at the beginning of the calendar year in which the right or portion of the right is restored and any credits registered to the flexibility account after the right is restored may not be conveyed or sold to any person, including the applicant.

3.        The applicant shall forfeit the extinguishment credits described in subsection (I)(3); and

4.        The restored irrigation grandfathered right may be extin- guished in exchange for extinguishment credits under this Section. For purposes of calculating the amount of extin- guishment credits under R12-15-724(B), R12-15-725(B), R12-15-726(B) or R12-15-727(B), the calendar year of extinguishment is the calendar year in which the restored irrigation grandfathered right is extinguished.

L.       The Director shall review an application to restore an irriga- tion grandfathered right under subsection (I) pursuant to the licensing time-frame provisions in R12-15-401. The applica- tion shall have an administrative completeness review time- frame of 30 days, a substantive review time-frame of 90 days, and an overall time-frame of 120 days.

Historical Note

Adopted effective February 7, 1995 (Supp. 95-1). Section repealed; new Section made by final rulemaking at 12

A.A.R. 3475, effective September 12, 2006 (Supp. 06-3). Amended by final rulemaking at 13 A.A.R. 1394, effec-

tive October 1, 2007 (Supp. 07-2). Amended by final

rulemaking at 17 A.A.R. 1989, effective September 13,

2011 (Supp. 11-3).