Digging Into Land Use Law

In the latest episode of Digging Into Land Use Law, Lori Anne Dolqueist and Alex Van Roekel discuss in detail the "Making Conservation a California Way of Life Framework" regulations and the impact they may have throughout California. Regulations went into effect at the beginning of 2025 and compliance is required by 2027. Lori and Alex detail this framework that will impact all urban retail water suppliers throughout the state – a category that covers about 95% of California residents.

Transcript: Making Conservation a California Way of Life Framework

^{0:00:00.2 Lori Anne Dolquiest: In 2024, after years of deliberation, California Water officials adopted landmark rules that will guide future water use and conservation in the state. This sweeping Making Conservation a California Way of Life framework went into effect on January 1st, 2025. And this framework is intended to help preserve water supplies as climate change drives hotter, drier conditions as and droughts become more frequent and longer lasting. For those interested in water and climate issues or how these new regulations will impact water suppliers and communities throughout the state, this podcast explains the purpose behind the new regulations, the intricacies of the regulations, including variances and incentives, and what this will mean for water in California going forward.}

^{0:00:52.2 Speaker 2: Welcome to Digging Into Land Use Law Nossaman's podcast covering the development of all things in, on or above the ground.}

^{0:01:08.5 LD: Welcome to Digging Into Land Use Law. I'm Lori Anne Dolquiest, a partner in Nossaman's Water Practice Group based in the San Francisco office. My practice focuses on the California Public Utilities Commission, with a particular focus on water utilities. Today I have with me my colleague Alex Van Roekel. Alex, why don't you tell us a little bit about yourself.}

^{0:01:29.9 Alex Van Roekel: Hi everyone, my name is Alex Van Roekel. I'm an attorney in Nossaman's Los Angeles office in the Water Practice Group. My practice focuses on all things water from public agencies such as cities, counties and special districts to invest our own utilities as well as private individuals and companies that have water disputes.}

^{0:01:48.2 LD: All right, Alex, well, I'm really excited to talk to you about these new water conservation regulations today. Why don't you give me a little bit of background how, you know, sort of where these came from?}

^{0:01:56.5 AVR: Making Conservation a California Way of Life framework, which I'm just going to call the framework developed from Senate Bill 606 and Assembly Bill 1668, which were both bills passed by the California legislature in 2018. And they're focused on urban water use objectives, which are essentially budgets for water providers. Additionally, the State Water Resources Control Board was tasked with developing the regulations for instituting the framework. And after the whole process, the framework went into effect in 2025 with compliance required starting in 2027.}

^{0:02:35.8 LD: You mentioned the Senate bill and the assembly bill that sort of got these started. But can you give me a little context for when they were passed and what the thinking was at that point?}

^{0:02:45.2 AVR: The bills were passed just off of the 2011 to 2017 severe drought that the state faced, and the bills were designed with a core goal of reducing urban water usage.}

^{0:02:56.6 LD: All right, now I'm familiar with some of the earlier legislation like the Water Conservation Act of 2009, which is also known as the 20 by 2020. Can you give me some information on that? Because I do believe that informed the passage of this latter legislation.}

^{0:03:11.6 AVR: The Water Conservation Act of 2009, often called the 20 by 2020 framework, was the state's first attempt to tackle water, urban water usage on a broader scale. And so it set standards for all water providers to reduce their usage by 20% by 2020. And all of the providers throughout the state met those standards far ahead of time. And so the practical impact of this history is that a lot of what would be the easier ways to reduce urban water usage have already been done. Examples include adding meters, introducing tiered conservation rates, which essentially means that if you use over a certain amount of water, you get charged a higher rate, replacing non functional turf, and then including rebates for things such as replacing the lawns and installing more efficient showerheads and toilets.}

^{0:04:05.3 LD: And I've seen in my two decades of practicing here in California the real difference that those have made. In particular, even something as simple as adding meters, which we think is very routine now, made a huge difference in allowing for conservation. But as you mentioned, these are the easy things. So what is left now to increase more efficient use of water here in California?}

^{0:04:29.3 AVR: So there's no question that what's left is going to be a lot more difficult to achieve than what was done under the 20 by 2020 framework. Some of the areas left include some of the people that were not reached by the initial outreach and rebates, and people could not have been reached either due to lack of interest or of lack of the ability to put money down pre rebate. And either way, it's going to likely take a different strategy to reach each of those groups of people than the people that were met under the 20 by 2020 framework. Additionally, we're likely to see some changes in land use policies, including a focus on how to design projects or developments to minimize water usage and take advantage of things such as stormwater capture or water reuse. And potentially the most exciting part about this framework is that it really opens the door for substantial innovation. We saw the innovation of drip irrigation revolutionize water usage in the agricultural industry, and it is likely we're going to see some of those kind of innovations to affect urban water usage.}

^{0:05:31.6 LD: Now, I've definitely experienced some of the issues related to the challenges in getting large water infrastructure projects approved and built, and they still likely will be necessary moving forward. But anything we can do in addition to those in the meantime while they're pending, we need to look at all of our options. But what I wanted to talk to you a little about is we mentioned the legislation from 2018, but it's now 2025. Our regulations are just going into effect, whereas there's some legislative work after that. I'm particularly interested in non functional turf and whether any actions have been taken with respect to that?}

^{0:06:09.7 AVR: Yes. So there's two primary bills that have impacted the framework since it was originally passed in 2018. The first bill was Senate Bill 1157 from 2022 and that lowered the indoor standard, essentially making that more difficult to meet and requiring that places use less water for indoor residential uses. And additionally there was Assembly Bill 1572, which was passed in 2023. Part of the design around AB 1572 was because there was some inconsistent legislation about how non functional turf was going to be treated under the framework as well as under some other bills that have been passed. And so AB 1572 created one centralized area for a non functional turf. And so what that bill did is it banned the usage of potable water. So drinkable water on non functional turf. And so for public agency property, that ban generally goes into effect at the beginning of 2027, unless the property is in a disadvantaged community and then it goes into effect starting in 2031.}

^{0:07:17.7 LD: And so non functional turf, that's, you know what it sounds like, this is turf that may be say like a lawn and a traffic median. You don't necessarily want to be using precious potable water for something like that. And also you mentioned the indoor water standard. Indoor water is generally considered what's non discretionary, what people need for hygiene, bathing, cooking, things like that. Then outdoor water is generally considered, although there are variances with this, is water that people have more control over. This might be water used for gardening, for things like lawns, things like that, pools. So that's why it's important to have kind of an indoor water standard and then to differentiate that from outdoor water use. I'd like to talk to you a little bit about the history of these new regulations and how they got started and the process by which they were developed and eventually adopted. Could you give me some information on that?}

^{0:08:08.6 AVR: As I mentioned earlier, the State Water Resources Control Board was tasked with developing and implementing regulations for the framework. And so before the State Water Board developed those regulations, the Department of Water Resources drafted guidelines and recommendations for the State Water Board. The State Water Board came out with their first draft of the regulations in August of 2023, and those regulations across the board were stricter than the} Department of Water Resource's recommendations.

0:08:37.3 LD: Was there an assessment regarding the impact of these regulations?

0:08:42.0 AVR: The State Water Resources Control Board issued what is called a standardized regulatory impact assessment and issued that to the office administrative law on May 19th, 2023. And according to that assessment, the framework with the regulations would create $16 billion in benefits and $13.5 billion in costs, with higher benefits going to residential customers.

0:09:07.6 LD: What were some of the reactions to that assessment? I remember hearing at the time that it was a little bit controversial.

0:09:14.8 AVR: So the reactions to the initial regulations were overall fairly negative. There was a study commissioned by the Mesa Water District that was completed by the firm mCubed that was issued in September of 2023. And contrary to the State Water Board's assessment, that analysis held that the benefit to cost ratio was 0.53, whereas the standard regulatory impact assessments was 1.24. And for reference, anything above a 1 means that the benefits are higher than the cost, whereas anything below 1 means that the costs are higher than the benefits. Additionally, the Public Policy Institute of California issued its analysis in November of 2023, and that was fairly critical as well. The highlight of the analysis was that the regulations would lead to a very high cost for very little benefit, noting that the regulations would result in a net cost of $7.4 billion to save less than 1.5% of annual water used by urban and water agricultural users and farms statewide. And last, the Legislative Analyst Office was required by the framework to develop its own analysis and then issued that on January 4th of 2024. And that was also fairly critical.

0:10:33.3 LD: It's my understanding that the regulations were subsequently updated in, I believe it was March of 2024, is that right?

0:10:41.0 AVR: That is correct. The primary update to the regulations was issued on March 12, 2024, and the press release that accompanied those noted that the goal of the update was to simplify compliance and increase flexibility.

0:10:55.9 LD: All right, and how did it do this?

0:10:58.1 AVR: So it changed the compliance states from starting in 2025 to 2027. That was largely because of COVID related delays to the Department of Water Resources and the State Water Resource Control Board's work. It also made it easier to qualify for variances, added a bonus incentive for water from direct potable reuse projects, and created two new alternative compliance pathways. One is for suppliers with households below median household incomes that needed at least an overall 20% reduction to meet their goals. And those parties have to show a reduction of 1% per year. And then there's an additional alternate compliance pathway. If a provider needs to cut at least 30% of their usage, they just need to show a reduction of at least 2% per year.

0:11:48.5 LD: Were there anything else that they changed other than these sort of incentives and alternative compliance pathways?

0:11:56.0 AVR: Apart from the primary update, there were a total of four other updates that the state water board issued to their regulations. Some of the most notable changes to those were that they changed the details on the standard if a provider is already meeting their budget. They also addressed the urban tree canopy issue, which is a concern raised based on the outdoor residential budget. To address that issue, they added a variance for irrigating existing residential trees starting in July of 2040, and they increased the size of the variant for planting climate ready trees.

0:12:32.1 LD: So what you call the urban tree canopy issue, was this a concern that water conservation regulations would lead communities to clear out or plant fewer trees, which can also have issues related to climate and heat and the impact of high temperatures? Is that correct?

0:12:49.6 AVR: Yes, that was the goal of addressing this issue was that there would be trees that would not receive enough water or that new trees would not be planted, and that agencies and water providers would have to make difficult choices to be able to meet their budgets. These additions were to try to avoid some of those difficult choices, recognizing the benefits of urban trees, including areas like avoiding hotspots.

0:13:12.3 LD: So ultimately, it's my understanding these were approved July 3rd, 2024. What was the updated analysis regarding the benefits and costs?

0:13:22.6 AVR: So the updated standardized regulatory impact assessment issued by the State Water Board in June of 2024 stated that based on the new regulations, there would be $6.2 billion in benefits and $4.7 billion in costs.

0:13:38.6 LD: That's certainly improvements from some of the critical analyses that were done earlier, to the earlier versions of the regulations. Let's talk now though about the regulations themselves. It's my understanding these apply to water suppliers, not necessarily individual customers, although they will likely impact, or customers will sort of feel the impact of them eventually.

0:14:00.8 AVR: That is correct. The regulations target urban water suppliers, which are defined as a supplier that has at least 3,000 end users or provides at least 3,000 acre feet of potable water. And so in total, the regulations apply to about 405 suppliers across the state which provide water for roughly 95% of California residents.

0:14:22.2 LD: These are set as water budgets, is that right?

0:14:25.5 AVR: Yes. So the core focus of the regulations is on these urban water use objectives, which are essentially budgets. And the budgets are set up to get tougher over time with the most stringent requirements starting in the mid 2040s.

0:14:41.3 LD: And are these budgets differentiated as far as different uses? You've got residential, you've got commercial, industrial. Is that right?

0:14:49.3 AVR: Yes. So the budget is split into four categories. Indoor residential usage, outdoor residential usage, commercial industrial, and institutional uses, which we're going to call CII uses, with dedicated irrigation meters and water loss.

0:15:06.5 LD: So the statute sets the indoor residential use standards. What about the CII?

0:15:13.3 AVR: So the CII is focused on meters that measure only the amount of water used outdoors, as opposed to a mixed use meter, which measures both indoor and outdoor water usage together. That's what makes it a dedicated meter. And so the CII uses apply to commercial water users, industrial water users, and institutional water users.

0:15:36.6 LD: Alex, talk to me a little bit about water loss. I've often heard the word every drop of water in California is precious. And it looks like these statutes want to deal with the issue of water loss and minimizing the amount of water loss as part of the process of transmitting water to end users. Could you talk to me a little bit about that?

0:15:57.0 AVR: Water loss is defined as the amount of leakage and other water that water suppliers lose, but does not end up with its customers. So the water usage in the framework is based on Senate Bill 555 from 2015, which includes its own reporting requirements and water law standards. Additionally, the State Water Board has a model that it is issued to calculate the supplier's individual standards, and at this point in time, it is released standards for all providers.

0:16:24.1 LD: And what are these different standards?

0:16:27.5 AVR: So the two different standards include one, if the benefit from fixing the water loss is greater than its cost, then the standard is the average baseline real loss. Whereas if the benefit from fixing the water loss is the same or less than its cost, then the standard is the sum of the background reported and unreported leakage.

0:16:46.7 LD: And it appears to be this sets an incentive for identifying and fixing water loss sources as the best course of action to address water loss issues. Certainly that gets onto the issue of other incentives or variances that I believe are baked into the new regulations. Can you give us some information regarding these variances and incentives, which it's my understanding they're designed to address the fact that water use varies due to a variety of factors. The customer, makeup of the customer base, the region, the technology needed to provide water service. And earlier, water conservation regulations were criticized for being too blunt. And I believe that the new regulations tried to address this issue.

0:17:30.2 AVR: Yes. So in order to kind of help providers to meet their budgets, the regulations offer alternative compliance pathways which we discussed earlier. Variances, temporary provisions, and bonus incentives. So variances are based on structural factors that cause some areas that have higher water usage, and they're defined as a unique use that has a material effect on a supplier's urban water use objective. The temporary provisions are distinguished from variances because they only apply for a limited time. They are available for challenges within wastewater collection, treatment and reuse system, the planting of new climate ready trees and the establishment of qualifying landscapes, which are those that require temporary irrigation and are associated with particular kinds of development. The bonus incentives are based on potable reuse and there's also extensions that are available based on having a disadvantaged community designation based on household income, a low benefit to cost ratio, or the need for substantial improvements.

0:18:34.0 LD: Alex, can you give me an actual example of what some variances might be?

0:18:39.9 AVR: Yes. So, examples of variances include populations of horses or other livestock, responding to non drought emergencies, and irrigating existing residential trees. So for emergency events, there are variances related to both outdoor residential and CII uses and they apply to declared state and local emergencies. An example of this would be the recent wildfires in Southern California for which Governor Newsom declared a state of emergency. As a result, urban water suppliers may be able to obtain a variance based on these recent wildfires.

0:19:13.5 LD: That's interesting. I know the recent wildfires have really put a focus on water issues both in Southern California and throughout the state. It's interesting that these regulations sort of anticipated that. And it'll be interesting also to see whether there are any new regulations to address those issues going forward. But what about, also, you mentioned bonus incentives. Could you provide me some examples of those?

0:19:40.4 AVR: Yeah. So the bonus incentives are designed around potable reuse, which is the recycling of water that turns previously used water into drinking water quality. And there are two forms of potable reuse, direct and indirect. Indirect potable reuse has been around for a while in California. And so what that is is the taking of used water, cleaning it, and then injecting it into an environmental buffer, such as a groundwater or aquifer, where it can mix with other water. Some estimates put the current indirect potable reuse as 750,000 acre feet, which Governor Newsom hopes to raise by 800,000 by 2030 and 1.8 million by 2040. One notable example is the Orange County Water District Groundwater Replenishment System, which is the world's largest water purification system for indirect potable reuse. It recycles 130 million gallons of water a day. And involved a $900 million investment to expand water reuse. A second example is pure water San Diego, which is currently partially built, but will provide nearly half of San Diego's water supply by the end of 2035. And phase one is designed to tackle 30 million gallons per day. And then there's also direct reuse, which is the cleaning of water and then piping it directly to customers without using any buffer.

0:21:02.8 AVR: The regulations were just passed to allow direct potable reuse at the end of 2023 with an effective date of August of 2024. And so projects are still being developed to take advantage of those regulations.

0:21:15.9 LD: I'll be interested to see what happens in the world with direct reuse. As you mentioned, we have several notable examples of indirect potable reuse, and it will be interesting to see what movement there is made towards direct reuse. But I also, moving on, I wanted to talk a little bit about reporting with respect to these regulations. If you could provide some information to our listeners regarding the recording and also the enforcement requirements, which are always top of mind for water suppliers that need to comply.

0:21:48.2 AVR: Yes, so the reporting to the Department of Water Resources is required every year starting on November 1st of 2023. And the reporting includes details on what needs to be reported for variances. And then in terms of enforcement, the state is authorized to issue informational orders starting on November 1st of 2023, written notices on November 1st of 2024, and conservation orders on November 1st of 2025. The regulation provide for fines of up to $1,000 per day under normal conditions and $10,000 per day under drought conditions. And the failure to provide the requested information in the reporting is also a violation subject to civil liability. So suppliers who violate the framework could be subject to actions or even fines. But at least initially, officials have said the emphasis will be on progress and compliance at the outset.

0:22:42.4 LD: Well, that's good to hear as everyone learns how to work with these regulations and we see what happens when they're actually put into effect. Now, I remember when these regulations were implemented, the reactions did vary. I know there was some concern by the public interest groups that the regulations don't go far enough. And also I know there were some concerns from smaller and disadvantaged communities. These conservation regulations, there is a cost to compliance. And I do know that there were some changes made, like you mentioned, to address those concerns. But I think those concerns will still continue going forward. And I think you also mentioned, I was glad to hear you talked particularly about the issue related to the trees, which I know got a lot of spotlight when it was first brought up because that's an issue particularly in urban environments and in particularly in disadvantaged urban environments may not have as much tree coverage. So I do know that the groups that raised that concern were police that that variance was put in. As you know, Nossaman represents many water providers, both publicly owned and investor owned. And based on my discussions with water suppliers, I think that regulations, the reaction to the regulations is generally positive.

0:23:53.2 LD: All Californians know that we need to take steps to increase the efficiency of water use. And the water suppliers are, have been working towards this for decades. I do know though that there are concerns about reporting requirements and the costs and sort of the scale, you know, will these decreases actually be achievable? So as I mentioned, I think it will be interesting to see how this actually plays out going forward. But I'd like you to discuss a little bit about the impact of these regulations. The forecasts that we see, how these will impact the state of California both with respect to water saved and also with respect to the costs.

0:24:35.9 AVR: Yes. So the regulations were initially tasked as costing $13.5 billion through 2040, and the update is now $4.7 billion through 2050. Obviously substantially less with the updated regulations. But $4.7 billion is still a substantial cost for water providers. Regulations are also projected to save roughly 500,000 acre feet of water annually by 2040, which should be enough to supply roughly 1.4 million households per year.

0:25:07.4 LD: Those figures are interesting and I will be looking at these to see if we actually do achieve these savings at this cost. But Alex, I think that regardless of the water saved, it's likely that these regulations will impact the way we think about water usage in this state. Do you agree?

0:25:26.7 AVR: Yeah, I think there's no question. As I mentioned before, this is a possibility for substantial innovation going forward. We're likely to see land use policies that will have to really consider their water source and how to design projects to operate as efficiently as possible. We're likely to see increases in areas such as water recycling and water reuse and stormwater capture. We're likely to see more water reuse projects through both larger recycling plants as well as smaller project specific developments. And it is likely we will see some substantial innovations that will change water usage in the state out of necessity to meet these regulations.

0:26:02.0 LD: I agree. I think we are going to see probably all of that and more. And we here at Nossaman will likely be both involved and watching all of these developments.

0:26:11.6 AVR: So we've covered a lot of ground here today. Starting with the basis for the regulations, reporting and enforcement and the potential impacts of regulations on California communities. And I hope you found this informative and it's been a joy to talk with you as always, Lori.

0:26:26.0 LD: You too, Alex. Thank you to our listeners for joining us for this episode of Digging Into Land Use Law. For additional information on this topic or other environmental land use matters, please visit our website @nossaman.com and don't forget to subscribe to Digging Into Land Use Law wherever you listen to podcasts so you don't miss an episode. Until next time.

0:26:52.8 Speaker 2: Digging Into Land Use Law is presented by Nossaman LLP and cannot be copied or rebroadcast without consent. Content reflects the personal views and opinions of the participants. The information provided in this podcast is for informational purposes only, is not intended as legal advice, and does not create an attorney client relationship. Listeners should not act solely upon this information without seeking professional legal counsel.