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PHOENIX (CN) — Facing challenges over cost and constitutional liberties, the Arizona Department of Water Resources says a new groundwater rule will promote housing development, not hamper it.
The Arizona Department of Resources established the groundwater offset rule in 2024 to allow developers to build more housing on over-pumped and depleting groundwater aquifers, forgoing the traditional proof of a 100-year supply needed for a water certificate.
But the Home Builders Association of Central Arizona, backed by legislative Republicans, says the department overstepped its constitutional authority by pigeonholing developers into the most expensive option when alternatives are physically unavailable.
“The legislature is certainly smart enough to understand that there is a water problem in Arizona,” attorney Emily Gould, representing the association and the lawmakers, said in a Friday morning hearing on the department’s motion to dismiss. “If they wanted to redefine assured water supply to cover over some historic overdraft, they could have specifically authorized the department to do so. And they simply did not.”
Democratic Governor Katie Hobbs announced a development moratorium in Phoenix’s west valley in 2023 after revealing that the land doesn’t have the groundwater to sustain new construction at its current pace. Since then, the department has worked to provide “alternative paths to assured water supply” that include the water offset rule.
The rule requires that, rather than prove the existence of a 100-year supply, developers can offset 25% of new pumping by providing an alternative water source, like imported water or treated wastewater. The department says the goal is to gradually reduce the user’s reliance on groundwater, further stretching the remaining supply.
Developers could still opt for a hydrological study proving a 100-year availability, but both parties agree that the option isn’t currently feasible.
Because of the lack of available groundwater, new restrictions and the cost it would require to use 100% imported or treated water, developers say the new alternative is the only way to earn a water certificate from the department.
Defense attorney Bo Dul said that isn’t the department’s problem.
“Due to current hydrologic conditions, it’s not possible to show physical availability of that 100 acre feet of groundwater,” the Coppersmith Brockelman attorney said Wednesday. “That is not a function of the new rule that’s being challenged in this case. It’s a function of the actual, current state of the aquifers in these areas.”
Gould suggested that there’s more available water than the department lets on, instead blaming overregulation for the shortage.
“The department’s regulatory regime has made it so that [100-year supply] can never be satisfied," she said.
Dul told Maricopa County Judge Scott Blaney that the state law specifically allows for the department to make rules facilitating the purpose of the Groundwater Management Act, including helping developers achieve an assured water supply, and therefore, the department needed no further specific authorization from the Legislature.
Gould, a Holtzman Vogel attorney, said the creation of the rule went beyond the regulatory framework drafted by the Legislature. Quoting Hobbs’ 2024 State of the State address, Gould said the executive branch acted unilaterally and against the interests of the Legislature.
The plaintiffs also say the new rule violates eminent domain by enacting a “water tax” on new developments, violating their right to fairly acquire private property.
“The department has conceded that some cost will be passed down to our members,” Gould said.
Dul said both the potential costs and future developments are too speculative to establish standing for an eminent domain claim, as the plaintiffs have identified no specific property interest and nothing has been taken from them.
Blaney suggested, if the case survives past the dismissal phase, that the parties depose a water provider to get a more accurate estimate of how much the extra regulations might cost, and how much of it would be passed down to land developers.
Dul said to do so would be “laying a hypothetical upon a hypothetical.”
Though she did not address the cost directly, Dul said the rule would require no more water than what is in the proposed use, countering the plaintiffs’ characterization of a “water surcharge.”
“The plaintiffs aren’t required to do or pay anything to any government entity,” she said.
Blaney said he would rule on the department’s motion to dismiss as soon as possible.
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